The debt of US nonfinancial businesses had already surged in recent years, but when the Pandemic hit, businesses went on a borrowing binge as the Fed has repressed interest rates to record lows even for the riskiest corporate borrowers.

These debts of nonfinancial businesses – including corporations and businesses that are not incorporated – jumped by 9.1% year-over-year to $17.7 trillion in Q4 2020, according to the Fed’s Financial Stability Report. This amounts to 82.4% of nominal GDP. The Fed has been ruminating in its financial stability reports about the risks posed by corporate debt.

These debts are from nonfinancial businesses and exclude banks, nonbank lenders, insurance companies, and other lenders because lenders borrow and then lend, and including their debts would lead to some double-counting.

But what is happening in the USA pales compared to what is happening in some other countries, such as the corporate tax havens and financial centers of Luxembourg, Ireland, and Hong Kong, and of course in China, according to the data released today by the Bank for International Settlements (BIS) for Q4 2020. It leaves the USA in ignominious 22nd place!

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In an interview a few days ago that aired locally, the owner of an Italian restaurant in San Francisco – the restaurant scene is now vibrant in a different way than before – put her struggles with hiring on the table. The kitchen staff had come back, she said, but she had trouble hiring back the staff for the front of the restaurant, the wait staff, who are normally fairly well paid via tips.

She said that many of these people have other dreams. They were artists or writers or students or entrepreneurs, or whatever, and waiting tables wasn’t their career, it was just a way to make ends meet. And many of them had moved on during the pandemic or were using their unemployment benefits to push their dreams forward, rather than returning to restaurant work.

Employment in food services and drinking places rose by 186,000 in May from April, according to the Bureau of Labor Statistics today. In the leisure and hospitality industry overall – which also includes hotels and casinos – employment jumped by 292,000 in May, and has been gaining all year as restaurants and hotels reopened, but was still down by 2.5 million people compared to the peak in February 2020.

Every restaurant owner has their own struggles. Pay raises are being implemented to bring people back, including at big chain restaurants. But what the owner of the Italian restaurant said was that for her, hiring waitstaff, who earn substantial tips, was the difficulty; and that her kitchen staff, the hourly employees, were largely back at work. Which makes the whole story a lot more complex.

Then there is manufacturing. The complaints from manufacturers about the difficulties of hiring have been circling for decades, as the industry is requiring ever more sophisticated labor because automation is playing an ever-larger role.

But now, in addition to the difficulties of finding the right kind of labor, manufacturers are deeply tangled up in supply-chain issues and being able to get components, raw materials, and supplies in time, with lead-times blowing out, putting a damper on what they could manufacture, and on the labor they could employ if they got everything they needed.

Every crisis has incentivized manufacturers to cut costs by investing in automation or by offshoring production. Manufacturing employment peaked in the 1970s and has since fallen by about one third.

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