Bureau of Labor Statistics (BLS) reports   

The employment report from the Bureau of Labor Statistics (BLS) showed nearly 7.5 million payrolls combined were added in May and June, but levels remain well below pre-pandemic levels. The BLS reported that the number of seasonally adjusted (SA) job openings in May rose 8 percent from April. The number of unemployed still exceeded the number of job openings by a staggering 15.5 million.

Related, the number of SA weekly unemployment claims fell to 1.314 million for the week ending July 4, 2020, which marked 14 consecutive weeks of falling claims. Still, for comparison, the average weekly unemployment claims for 2009, during the depths of the Great Recession, was 574,000.

Regarding inflation, the BLS reported that the Producer Price Index (PPI) for finished goods, which measures the change in prices received by producers and is an indicator of inflation at the wholesale level, remained unchanged in June from May, and fell 2.1 percent compared with a year earlier. Core PPI, which excludes food and energy producers, also remained unchanged in June from May but was up 1 percent from June of last year. Despite supply disruptions creating inflationary pressure, the PPI decreased, reflecting a collapse in demand.     

The PPI for long-distance truckload and long-distance less-than-truckload fell 2.5 percent and 1.2 percent in June from May, respectively. On a year-over-year basis, this measure for truckload freight plunged 8.3 percent, while this measure for LTL freight decreased 2.7 percent. The trucking PPIs include fuel surcharges.

Service sector signaling recovery

The U.S. services industries showed signs of recovery in June as businesses took early steps to reopen following the easing of some of the coronavirus-related lockdowns, according to two surveys of purchasing managers. Analysts warn those gains could be undone in July as a resurgence of cases in some states leads to another shutdown of businesses.

An index of service activity compiled by data firm IHS Markit registered 47.9 in June, up from 37.5 in May. The reading suggests that while economic activity in the U.S. services sector continues to contract, it is doing so at a slower pace. Readings of 50 or above are a sign of expansion while readings below 50 signal contractions.

A separate index compiled by the Institute for Supply Management posted 57.1 in June, the first month-over-month expansion following two straight months of contraction.

The service sector, especially the hospitality industry, was hard-hit by the shutdowns this spring. Private service employers shed 17.4 million jobs in April before clawing back 2.5 million in May and another 4.3 million June, according to the Labor Department.

Retail sales move upward

Consumers boosted spending at stores and auto dealerships in June for the second straight month as states reopened for business, but the recent increase in coronavirus cases could again damp job growth and retail spending.

The Commerce Department said June retail sales, a measure of purchases at stores, at restaurants and online, increased a seasonally adjusted 7.5 percent on the month. Retail sales totaled $524.3 billion in June, up from $487.7 billion in May and nearly back to pre-pandemic levels.

June’s increase in retail sales was driven by a pickup in sales of autos, furniture, clothing and electronics.

In another sign people were on the move, spending on gasoline increased 15.3 percent from the prior month. Receipts at bars and restaurants also jumped 20 percent from May.

Government stimulus, such as enhanced unemployment insurance for laid-off workers, have helped propel the rebound. Another point here is that the retail-sales report didn’t track spending on most services, such as health care and hospitality, which make up most of U.S. consumer spending.

June unemployment falls

The Labor Department reports that the June unemployment rate fell to 11.1 percent from 13.3 percent in May. Still, the jobless rate remains at historically high levels. Until March, before the pandemic drove the U.S. into a deep recession, the unemployment rate was hovering around a 50-year low of 3.5 percent.

Trucking companies added 8,100 jobs from May to June as parts of the U.S. economy began to reopen, adding to the continuing surge in shipping-industry jobs focused on fulfilling online retail commerce.

Parcel and warehouse operators brought on more than 80,000 workers last month, part of a national rebound in hiring that came as many states eased their lockdowns. The businesses serving e-commerce are increasingly confident the jobs will stick, with shifts in consumer buying patterns and supply chains expected to persist in a post-pandemic economy.

Trucking companies have added more than 10,000 jobs since slashing workers in March and April. However, the sector’s payrolls are down about 95,000 from a year ago, and with some states restoring coronavirus restrictions the road ahead for truckers looks uncertain.

Brick & mortar retail struggling

Brooks Brothers dressed the American business class in pinstripes for more than 200 years and survived two world wars and the shift to casual dressing, but it was no match for the coronavirus pandemic.

Brooks Brothers joins a parade of U.S. retailers seeking relief in bankruptcy court since March, including Neiman Marcus Group Inc., J. Crew Group Inc. and J.C. Penney Co.

Economic fallout from Covid-19 has also pushed high-profile companies in other industries into bankruptcy, including Hertz Global Holdings Inc. and Chesapeake Energy Corp.

ATA reports annual data

The trucking industry generated $791.7 billion in revenue in 2019, moving 11.84 billion tons of freight, according to the latest edition of American Trucking Associations’ annual data compendium, ATA American Trucking Trends 2020.

Among the other findings in trends:

  • In 2019, trucking’s revenues accounted for 80.4 percent of the nation’s freight bill
  • Trucks moved 67.7 percent of surface freight between the U.S. and Canada and 83.1 percent of cross-border trade with Mexico, for a total of $772 billion worth of goods
  • There are 7.95 million people employed in trucking-related jobs, up 140,000 from the previous year. This includes 3.6 million professional drivers;
  • Women make up 6.7 percent of the industry’s drivers and minorities account for 41.5 percent of truckers.
  • Most carriers are small companies – 91.3 percent of fleets operate six or fewer trucks and 97.4 percent operate 20 or fewer.

Current freight market condition

Pricing is surging as the supply of trucks and drivers have been affected through carrier bankruptcies and carriers leaving the market due to high insurance costs. Less trucks + higher volumes swing the pricing power back to the truckers.

Drivers are leaving the trucking industry, some voluntarily (due to retirement, normal high industry turnover, and COVID-related health concerns) and involuntarily (due mainly to the Drug and Alcohol Clearinghouse that was established in January 2020). At the same time, new driver supply is limited by temporary school closings and new driver training school protocol that allows for fewer trainees per class.

As far as insurance is concerned, there is an effort underway to increase the minimum insurance standards. Nuclear verdicts have driven some insurance carriers out of the market and left the others to continue jacking rates at an attempt to make money, especially in the excess layers. Now with the Moving Forward Act, there is a small part of the ~2,300-page proposed legislation that would increase the minimum insurance level for trucking companies from $750,000 to $2 million.

The DHL Supply Chain Pricing Power Index climbed to 55 last week, indicating carriers currently have the upper hand when negotiating spot rates. Rejection rates have started to decline in multiple markets, but remain elevated, forcing shippers to pay premium rates for on-demand capacity.

FreightWaves reports volumes have continued to burst all around the country this week. Carriers are rejecting loads at rates only seen during the March panic-buying spree buildup. Spot rates have been bid up above 2019 levels in many markets around the country.

DAT Solutions reports that in the week ending July 12th, load posts outpaced truck posts on the DAT One load board network. Capacity tightened ahead of the annual Roadcheck inspection blitz. Many carriers idle their equipment during this surge of roadside inspections. That pushed prices higher on many high-traffic lanes.

The national average spot rate in July is $2.02 per mile as compared to $1.81 in June.

Rail volume continues to slide

The Association of American Railroads (AAR) tells us that freight-rail traffic declined 14.9 percent to 449,092 carloads and intermodal units during the week ending July 11 compared with the same week a year ago.

Total carloads fell 22.7 percent to 201,703, while intermodal volume slipped 7.4 percent to 247,389 containers and trailers.

None of the 10 carload commodity groups that AAR tracks on a weekly basis posted an increase. Among the largest decreases were metallic ores and metals, down 41.6 percent to 13,884 carloads; coal, down 36.1 percent to 51,684 carloads; and petroleum and petroleum products, down 23 percent to 10,085 carloads.

Individual Class Is posted the following carload volume for the week: BNSF Railway Co., 71,295 carloads, down from 100,575 in 2019; CN, 51,990 carloads, down from 63,084; Canadian Pacific, 28,269 carloads, down from 33,624; CSX, 57,727 carloads, down from 64,847; Kansas City Southern, 12,590 carloads, down from 14,610; Norfolk Southern Railway, 49,618 carloads, down from 64,143; and Union Pacific Railroad, 77,073 carloads, down from 96,556.

At Wagner Logistics

As one can see from the numbers above, the nation may be technically in a recession, but we are not experiencing that at Wagner. Demand for warehousing has never been stronger due to changing customer supply chains coupled with the burst in eCommerce.

Our team is working on exciting new projects and startup operations while strengthening existing processes. I hope that we at Wagner 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 may Wagner Logistics do for 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 20 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!