It’s time to look at what’s going on in the broader economy, technological change in relation to the trucking industry and other news relevant to broader trucking. As new economic numbers are released a picture of the economy comes into resolution. Fortunately, the picture still looks good.
First, let’s dig deeper into the broader economy. From job growth to manufacturing, there’s a lot to cover in this latest economic around up. How is the U.S. economy doing? Furthermore, how does current economic performance impact the broader trucking industry?
The Latest Economic Indicator Data
Although the economy has generally been on a tear all year, job growth slowed in august. Still, manufacturing data shows the U.S. hitting a six-year high on the back of construction spending.
All this activity shows in consumer sentiment, which is at the highest level it has been since 2000. With retail spending remaining buoyant, there appears to be much to be happy about.
Businesses added 156,000 non-farm jobs in August, which does come in on the lower end of what analysts were expecting. Trucking payrolls also fell in August. As a result, the unemployment rate edged up slightly to 4.4% from the 16-year low of 4.3% in July.
Slightly concerning is the news that the Labor Department dropped their June and July job growth estimates by 41,000 jobs. Does this mean that there is some anemia in the job market as we move into the latter half of the year?
Possibly. Also consider that hiring has allowed from the levels we saw earlier in the year, when 200,000+ job creation months was not entirely unheard of, indeed, was even commonplace. Not so much anymore.
The average so far, this year across all months stands at 176,000 jobs, which is lower than where we were now in 2016 when we averaged 187,000 jobs over the course of the year.
Job gains spread across all sectors outside of just manufacturing and construction. Professional, technical, health care and mining job interests also rose in August, by a combined 36,000 positions.
The big winner, however, is manufacturing, which has added a total of 155,000 jobs since November of 2016. Still, this doesn’t mean the report was filled with all roses and good news.
What has gotten the attention of Federal Reserve policymakers is the stagnant wage growth still plaguing the American job market. According to market analysts, wage growth has been stalled at 2.5% growth over the past five months. This despite, and not because of, the tighter labor market.
Since wage acceleration has plateaued, along with lower inflationary pressure, the Fed has the flexibility it needs to tighten or loosen monetary policy. Although conventional wisdom says that the Fed should be more influenced by the tight labor market and sluggish growth than inflationary pressure, no one knows what the future will bring.
Others believe a year-end rate hike is a bit more of a certainty, pointing to something major happening in the market as the only thing that could prevent higher interest rates. Will momentum stall?
Details On The Latest Economic Indicators
On the trucking side of things, for-hire trucking jobs contracted by 1,600 jobs in August. Despite this, the wider transportation sector, which includes warehousing, expanded by almost 2,000 jobs over the reporting period.
Sectors within trucking that saw large gains included couriers, messengers and other last-mile delivery operations. Growth in this sector follows the same trajectory as the explosive growth we’ve seen in the e-commerce sector.
Warehousing jobs continue to expand as e-commerce grows, as well. Amazon recently held a nationwide job fair where they advertised for over 50,000 warehouse job openings. They failed in filling them all.
Manufacturing Is on a Tear
According to the Institute for Supply Management (ISM) August survey of manufacturing activity, indices increased from 56.3 in July to 58.8 in August. This represents the highest level of American manufacturing activity since 2011 and beat analyst estimates in doing so.
With a reading over 50 signaling expansion, manufacturing – which represents approximately 12% of the U.S. economy – is at the vanguard of good underlying economic fundamentals. Even better, the New Orders Index recorded a whopping 60.3 in August. The production index also increased by four tenths of a percent, leaving it at a current 61.
With these readings well above the economically significant 50 reading, one thing is certain: there’s health in manufacturing. Out of the 18 manufacturing industries surveyed for the report, 14 said they experienced growth in August.
New orders, production, employment, product backlog and more – from expanding inventories to new business opportunities – there’s plenty to like about increasing business activity in August. Still, there was that one glaring exception from August reports, and that’s the inexplicable drop in construction spending.
Construction Spending Takes a Dip
It’s been a blazing summer, yet for some reason the one industry that seemed immune from the heat of growth was the construction industry. Construction spending in the U.S. dropped unexpectedly, skidding six tenths of a percent from July to August. The seasonally adjusted annual construction spending rate of $1.2 trillion represents a nine-month low, according to numbers released by the Commerce Department.
This unfortunate blip in an otherwise stellar economic outlook further muddies the picture considering the final number was a downward revision from June, which itself represented a 1.4 percent drop from May totals. The point is this: Construction spending has been on a downward spiral for some time now.
While, at first glance, the report on construction spending may look bleak, there is plenty to be optimistic about. The weakness in construction comes on the nonresidential side. Might strength in September payrolls signal a turnaround for the sector? Only time will tell.
Consumers Are Feeling Good
When consumers are happy, there’s usually good bottom line numbers to prove it. Despite slipping from higher mid-month levels, consumer confidence remains quite high.
The University of Michigan consumer outlook survey showed both month-over-month and year-over-year gains. As a matter of fact, the consumer confidence index briefly hit a higher reading than it has seen since the year 2,000.
So, what’s behind the renewed strength in consumer sentiment for August? Most of it can be attributed to consumers’ own increased savvy. As people come around to a more positive assessment of their own personal situation, consumer sentiment will only continue to rise.
When combined with ongoing lows in unemployment, inflation, interest rates, home and land values and more, healthy industries, from trucking to manufacturing, act as the lifeblood of our national economy.
Certainly, superstorms like Hurricane Harvey and Irma dampen the pace of growth and lead to higher commodity prices. Yet, consumers remain resilient. Temporary price hikes point to a brief period of weakness, but they don’t signal any major long-term issue. Point is, none of these events are likely to increase or decrease consumer spending trends.
A High GDP Lifts All Boats
Need more good news? U.S. GDP growth rang in higher than that of the second quarter of the year. It’s a level of growth that sets the pace for the remainder of the year. A quarter earlier the U.S. economy had grown at a rate of 2.6 percent. For the quarter just wrapped up, GDP growth came in at a healthy 3 percent.
Consider that the first quarter of 2017 generated an anemic 1.2 percent GDP growth and it’s hard to not get excited about these latest numbers. Certainly, this means the economy is on fire? Well, not so fast. Let’s look a little closer at those GDP numbers.
The positive GDP growth came from spending increases in the areas of:
- Personal spending;
- Nonresidential fixed investments;
- Government spending;
- Private inventory investment, and more.
Offsetting these positive inputs were negative readings in the areas of residential fixed investments and state and local government spending.
Were it not for unforeseen weather catastrophes, it is likely analysts would have been crowing even better numbers, whether forecasted or realized. With private sector employment booming and consumer sentiment at its highest level in some time, many are wondering if there is much to fear in an overheating economy?
Considering the trucking industry on its own saw a job contraction, there’s no reason to harbor ill will towards anyone who may question whether the economy is in as good a state as the numbers show. After all, there is plenty of uncertainty on the horizon.
Still, with all the indicators pointing to a healthy economy, trucking can reasonably expect to see continued growth, even if we see short-term dips in overall job creation. The overall health of the economy appears to be on track, and trucking is no exception.
Will these indicators show as much resilience as we move into the latter half of this year and into 2018? Although only time will tell, there is plenty of room for optimism as one merely goes by current economic activity and future forecasts. The future looks bright, and not just for trucking, but for the supply chain as a whole.