This Editorial appears in the April 11 print edition of Transport Topics. Click here to subscribe today. While the U.S. economy continues to look better and better in many ways, there are some pretty powerful reasons for truckers to remain cautious, or at least watchful in the coming months.
Yes, tonnage is up, and growing. Economist Noel Perry of FTR Associates has predicted that tonnage will increase 5% this year, as stronger manufacturing and consumer demand provide more loads to haul.
Yes, unemployment is down. The Labor Department recently reported that the unemployment rate hit a two-year low of 8.8% in March, while the number of people employed jumped 216,000. More people with jobs means more consumer purchasing, which means more truck tonnage.
And yes, the overall economy is growing nicely. The Commerce Department said gross domestic product — the broadest measure of the economy — increased to a 3.1% annual rate in the fourth quarter of last year, up from 2.6% in the third quarter. Bob Costello, American Trucking Associations’ chief economist, said that trend should continue, predicting a 3.2% gain for the year. Economist Perry was even more optimistic, forecasting a 3.5% GDP gain this year.
But on the other hand, as the economists love to say, there are risks.
Housing is definitely holding growth back, and that’s a big source of demand for trucking. As economist Perry pointed out, weakness in housing brought GDP down by 1.5 percentage points during 2009 and accounted for nearly 40% of the drop in demand for trucking that year.
In addition to the housing weakness, there remain some major uncertainties in world events that could upset some segments of the U.S. economy.
As this article was being written, Japan was shaken once again, this time by a magnitude 7.4 earthquake that brought tsunami warnings and fears of further nuclear reactor damage, even as the world’s third-largest economy struggles with the effects of the massive earthquake, tsunami and nuclear catastrophe of last month.
And the fuse is burning on the Middle East powder keg, helping to boost crude oil prices, and a constant reminder of how vulnerable the economy is to a supply interruption.
The price of crude oil climbed over $110 a barrel on April 7, and the retail average for fuel is approaching $4 a gallon.
While surcharges help truckers recoup their higher costs, at some point, more-expensive fuel becomes a major drag on the economy. As Costello put it, “unless oil jumps to $150 per barrel, we believe the U.S. economy will continue down the path of recovery.” Let’s hope oil prices don’t get high enough to test his theory.
