January employment positive
The Bureau of Labor Statistics reported that 225,000 jobs were added in January, well above 2019’s average of 175,000 monthly job additions. The average monthly job changes in 2019 was the lowest since 2011. In January the unemployment rate edged up 0.1 percentage point to 3.6 percent as participation improved.
The share of the population working or looking for work reached a seven-year high. Among prime-age workers (25 to 54 years old, when school and retirement generally aren’t big factors) the share of the population with a job was the highest since 2001.
Transportation and warehousing payrolls netted 28,300 in January, while for-hire trucking industry added 3,200 jobs last month. In all of 2019, for-hire trucking added 3,800 jobs, down from 54,600 in 2018 and 15,700 in 2017. Most of the weakness in this sector for 2019 was on the LTL side. Compared with 2018, TL carriers increased payrolls by 2.5 percent, while LTL carriers improved payrolls by just 0.8 percent.
Inflation adjusted average weekly earnings fell for the third consecutive month in December, down 0.1 percent from November, but finished the year 1.2 percent above 2018. Earnings continued to rise above inflation and at the fastest rate since 2015.
January consumer prices rise
The Labor Department reports that the consumer-price index, which measures changes in how much Americans are paying for everyday items such as clothes and food, rose a seasonally adjusted 0.1 percent last month.
Prices were up 2.5 percent in January from a year earlier, the largest year-over-year increase since October 2018.
The price index for personal-consumption expenditures, a separate measure from the Commerce Department and the Federal Reserve’s preferred inflation gauge, rose 1.6 percent in December from the same month in 2018, a modest increase from the 1.4 percent annual rise the prior month.
Manufactured goods orders rise
The Census Bureau reported that new orders for manufactured goods surged 1.8 percent in December from the previous month. Most of this gain was in defense aircraft and parts. Excluding the volatile transportation sector, this measure increased 0.6 percent from November.
Compared with a year earlier, factory orders fell 0.4 percent, the fifth consecutive decrease. Total factory orders for 2019 were off 0.5 percent from 2018. When removing the transportation industries, factory orders were up 1.3 percent in December compared with December 2018.
In related news, the Institute for Supply Management published their Purchasing Manger’s Index on Monday at 50.9 percent, up from five consecutive reports below 50. Any reading over 50 represents a growth so perhaps the factory sector has bottomed out.
The U.S. trade deficit narrowed in 2019 for the first time in six years as disputes with China and other countries reshaped relationships with economic partners. Exports declined last year for the first time since 2016. Imports fell more sharply. That combination shrank the overall trade deficit 1.7 percent, to $616.8 billion.
China lost its rank as the top U.S. trade partner, falling to third place behind Mexico and Canada. U.S. trade in goods rose faster with Vietnam than with any of its largest trading partners.
The trade deficit expanded in recent years partly because the U.S. economy was growing faster than the rest of the world. A smaller deficit due to falling imports and exports can be a sign of weaker demand and slowing economic growth.
China slashed tariffs on $75 billion of U.S. imports as part of its efforts to implement the recently signed trade agreement we’ll have to wait and see how this plays out.
Will trucking capacity fall?
It has been reported that more than 800 carriers closed their doors in 2019, and those are the ones that we know about. On the heels of those closures, the Drug & Alcohol Clearinghouse went live on Jan. 6th, so far more than 3,000 positive tests have been recorded, an average of over 100 per day, according to DriverReach.
At a time when the industry needs operators the annual run rate for loss of drivers to drug testing is 26,000. How will this affect carrier capacity this year?
Smaller carriers are reeling from staggering increases in insurance costs coupled with lower freight rates so watch for industry consolidation as bigger carriers selectively acquire the small ones to gain drivers.
Shippers are forecasting slightly more freight in 2020 than 2019 so watch for a tipping point mid-year.
Current freight market
February is a tough month for truckload companies. According to DAT Solutions, rates on many lanes hit their lowest points of the year during this stretch of winter, and prices were definitely trending downward at the end of January.
The overwhelming majority of the top 100 van lanes on the spot market saw lower rates last week, 81 lanes to be exact. The numbers were similarly tilted for both reefers.
There were a couple silver linings, volumes have held steady, even though a lack of urgency on the part of shippers has kept rates down. Even though prices are down practically everywhere, most declines were fewer than 10¢ per mile.
In the week ending February 9th, freight rates may have hit the bottom already, as rising load-to-truck ratios indicate an impending rebound for truckload pricing. Lower-priced lanes were the first to thaw, but other rates are also likely to gain strength in the coming weeks. The average dry van national average rate for February is trending at $1.81 per mile versus $1.87 in January.
Rail woes continue
The Association of American Railroads (AAR) reports that United States rail carload and intermodal volumes saw annual declines in January.
Rail carloads decreased 5.9 percent and nine of the 20 carload commodity categories tracked by the AAR were down annually. When excluding coal, carloads were down 2.1 percent and when excluding coal and grain, carloads fell 0.6 percent.
Intermodal containers and trailers decreased 5.4 percent compared to January 2019.
For the week ending February 1, AAR reported U.S. rail carloads were down 0.6 percent to 241,339, and intermodal units rose 5.2 percent to 268,822.
At Wagner Logistics
Super bowl fever hit our home office in Kansas City as everyone showed their team spirit and relished the Chiefs victory after 50 long years of waiting for another Lombardi trophy.
I like to think that the same winning attributes are present at Wagner Logistics. Execution, resourcefulness, playing as a team not as an individual, commitment and refusing to lose are hallmarks of winning.
It is seven degrees outside as write this and I am looking forward to spring. As pretty as the snow is, I’m ready for warmer days.
As you look forward to your year, I hope that we may have the opportunity to demonstrate our commitment to making your supply chain better. The Wagner team is innovating and continually improving our people and systems.
What can Wagner Logistics do for you?
If you are considering new distribution centers or a freight RFP, I hope you will give Wagner an opportunity to serve you. We have an extensive history of 74 years of service to our customers and would love the opportunity to collaborate with you.
As we say every day, Bring it!
Have a great day!
John Wagner Jr.
About Wagner Logistics
Wagner Logistics was founded in 1946 on the principle that every customer is a big deal and that continues to pervade our mentality, producing a superior customer experience. The company began in trucking and remains dynamic offering top-notch transportation, dedicated warehousing and robust fulfillment services. We strive to produce innovative solutions, in addition to our superior onboarding process which makes transitions seamless, and have been honored 18 years in a row by Inbound Logistics as a Top 100 3PL. Our customers drive our entry into new geographic markets, technological advances and ever-changing distribution challenges. Where do you want to be? Wagner says, Bring It!