Home prices rising
Year-over-year growth for the Case-Shiller U.S. National Home Price Index displayed a 7 percent increase in September, up from August’s 5.8 percent. Despite slower growth over the month in 10 and 20-city composite indices, growth shot above 6 percent in each.
September’s Case-Shiller national Home Price Index results highlighted growth, the index rising 7 percent year-over-year for the month.
Although the smaller 10- and 20-city composite indices grew more slowly, year-over-year growth bumped up above 6 percent in each (6.2 percent and 6.6 percent respectively).
The annual rate of growth was faster in August than in July in all three main indices. On a monthly (seasonally adjusted) basis, the 10- and 20-city indices were each up by more than 1 percent (1.2 percent and 1.3 percent, respectively), and the national index was up 1.4 percent from August.
In September, homes went under contract two weeks faster in that the year before. than they did a year earlier. Elevated levels of market competition have been placing upward pressure on prices for months, but home prices have just recently begun to take off.
Labor market volatile while drivers scarce
Although numbers can be skewed by the holiday last week, jobless claims rose for the second straight week, to 778,000, a sign the nationwide surge in virus cases was starting to weigh on the labor-market recovery.
Claims haven’t risen for two consecutive weeks since July. Worker filings for unemployment insurance are down sharply from a peak of nearly seven million in late March. They remain higher than in any previous recession, the pre-pandemic peak was 695,000 in 1982.
Unemployment filings can be more volatile around the holidays, due to workweek changes that can cause seasonal-adjustment anomalies. The four-week moving average, which smooths out weekly variation, increased by 5,000 to 748,500 according to the Labor Department.
From a transportation perspective, the U.S. Labor Department reports trucking has added 66,000 jobs in its latest monthly report. Still, the industry is beset by a driver shortage that worsens as the labor situation becomes more constricted.
Since January, trucking also has lost more than 34,000 drivers in the new Drug and Alcohol Clearinghouse, and 26,500 have not begun the process to return to duty. The driver shortage also is being impacted by the slow return to normal at state department of motor vehicle offices, which were shut down or operated for six months or more at reduced levels because of the pandemic. That has affected the ability of new entrants to the industry because they cannot get commercial driver license testing.
The pipeline of new drivers coming into the industry is significantly down as truck driving schools are producing 20 to 50 percent less drivers than a year ago.
eCommerce continues growth
Shoppers went online to purchase holiday gifts and score Black Friday deals they once crowded into malls to grab. Roughly half as many people visited stores on Black Friday as they did last year, according to research firms that track foot traffic. Meanwhile, online spending jumped 22 percent from a year ago, making it the second-best online shopping day ever measured by Adobe Analytics.
Heading into the critical season, consumer spending has been strong despite the economic shocks and shutdowns tied to Covid-19. The National Retail Federation has forecast that holiday sales will increase at least 3.6 percent to about $755 billion, including at least 20 percent growth from online shopping to about $202 billion.
This year, web shoppers on Amazon.com Inc. or Best Buy Co. could get many of the same deals that stores once dangled only to those who lined up overnight. Those who did venture out made fewer stops and increasingly turned to big-box chains like Walmart Inc. and Target Corp. that sell everything from lettuce to Legos, according to the foot-traffic data, shoppers and retail analysts.
People spent an average of just under $312 on holiday-related purchases, a 14 percent drop from 2019, during the five-day period stretching from Thanksgiving to Cyber Monday, according to a survey by the National Retail Federation and Prosper Insights & Analytics. That was lower than the approximately $362 a year ago. but similar to 2018, according to the research. NRF President and Chief Executive Matthew Shay attributed the drop to consumers starting their shopping earlier, adding more than half of holiday shoppers indicated they utilized early sales.
A total of 186.4 million people shopped either online or in stores over the weekend, down from 189.6 million a year earlier. However, the number of shoppers in 2020 was higher than 2018, when total shoppers for the weekend were 165.8 million.
Seasonal package-delivery networks are already bursting at the seams. United Parcel Service has imposed shipping restrictions on some large retailers in an early sign that the pandemic-fueled online shopping season is stretching delivery networks to their limits.
The orders on Monday targeted retailers including Gap, Nike, L.L. Bean and Macy’s with “no exceptions,” following through on warnings from parcel carriers that they would closely watch contractual commitments to keep their networks running smoothly.
The UPS move comes during a holiday season when retailers increasingly depend on delivery companies to move online orders, significantly shifting the power in the carrier-shipper dealings. UPS says it will pick up packages from customers whose demand exceeds allocated space once more capacity becomes available. With parcel networks likely to remain jammed through the holiday season, retailers and their shopping customers have few other options.
The temporary limits, which some drivers say they haven’t seen during previous holiday seasons, are a sign that UPS is metering the flow of packages into its network to preserve its performance during one of the busiest shipping weeks of the year. The National Retail Federation estimated that online shopping jumped 44 percent over a five-day stretch including Black Friday and Cyber Monday.
FedEx and UPS both prepared their customers for tight capacity for this holiday season, as homebound shoppers, fearful of visiting stores due to the coronavirus pandemic, are stocking up on household essentials from online merchants at the same time the holiday shopping season kicks off.
Logistics Manager's Index remains high but stable
The November 2020 Logistics Manager's Index (LMI) is at 70.8, while this is down very slightly (-0.8) from October, it still represents a significant rate of growth, and is up nearly 20 points from its all-time low of 51.3 in April 2020.
The high rates of growth reported in November stem from high prices and a record contraction in available capacity, Much of this growth stems from the increased demand for logistics services and infrastructure due to the new ways in which people are shopping due to the ongoing pandemic. Online sales may be up by as much as 33 percent over Q4, coming close to $200 billion in sales in the U.S. alone.
An early indicator of this shift in consumer shopping behaviors can be seen in the 50 percent reduction in foot-traffic, combined with the 22 percent increase in online sales that were reported on Black Friday. Ecommerce tends to be more logistics-intensive, requiring firms to carry more inventory and utilize more trucks and warehouses.
Because e-commerce is growing much more quickly than predicted, it has been difficult for firms to procure the infrastructure necessary to fulfill consumer demand. This reflected in the plummeting rates of available Warehousing Capacity, which this month read in at their lowest-ever level in the history of the LMI®. Transportation Capacity is dropping even more rapidly and this month we observe continuing rates of growth in the cost of each.
Demand for logistics services is likely to continue even after the Q4 rush subsides.
Retailers are expecting that record-setting online sales will lead to record-setting returns. Large items such as office chairs or exercise bikes will pose a significant challenge as they are difficult to ship and process efficiently. Adding to this stress will be the need to ship out billions of doses of COVID-19 vaccines around the globe. DHL predicts that at least 200,000 pallets of vaccine will need to be shipped by air alone to properly distribute the rollout, something that will be made more difficult by the reduction in flights. The vaccine rollout might come sooner than expected, with firms looking to begin shipping remedies as soon as they are approved by the FDA; an event which could occur as early as the second week of December.
Overall, the LMI is down very slightly (-0.8) from October’s reading of 71.6. It is important to remember that this is a rate of growth, and not overall growth, so the logistics industry still expanded significantly in November, albeit at a slightly slower pace. However, this still represents a significant rate of growth and is tied for the fifth-highest rate in the history of the index. The rate of growth we observe for logistics services is similar to what we might see with a booming economy. As discussed above, this is largely due to the increase in demand for logistics services driven by the pandemic.
Driver pay rising
Carriers are boosting compensation to address an ongoing driver shortage that some fear may worsen as a recent surge in COVID-19 cases threatens to put new strains on the supply chain.
Among carriers boosting pay, Stevens Transport said that it will increase pay for all drivers by as much as 14 percent, while Kentucky-based CoreTrans on Nov. 12 announced a compensation program with increased pay and home-time options.
Effective Jan. 3, Cargo Transporters will raise solo driver pay by 2 cents and team driver pay by 1 cent per dispatched mile.
Wisconsin-based Paper Transport Inc. said certain regional drivers will receive a 7 percent pay increase on average and a minimum weekly pay guarantee. And Venture Transport announced that it would increase pay for regional and over-the-road drivers based in Indianapolis and St. Louis. The increase is based on tenure and experience but will equate to approximately 4 percent in gross pay.
Others are recognizing the work their employees have already done during the pandemic. Ryder System, for one, committed to providing $30 million in bonuses to its frontline employees in appreciation for their efforts during the coronavirus pandemic.
Future and Current market conditions
Unusual and unpredictable freight patterns, rebuilding supply chains with new inventory, an influx of owner-operators into the market and the worsening driver shortage for company fleets are causing trucking experts to expect a “very strong” market for industry profitability in 2021.
I’m expecting retailers to restock depleted inventory and a long-delayed rebound in manufacturing following the COVID economic shutdown should bode well for trucking in the first half of 2021. I believe that the industry will pick up steam through the first quarter and be even stronger in the second quarter as the vaccine rolls out.
In fact, FTR is forecasting contract rates in truckload in 2021 to rise close to 10 percent while spot rates will be up in the high single digits.
So, as we look forward to a much healthier 2021, there will be other headaches through the supply chains. But shippers should be warned that they will have to budget for significantly higher freight rates come the New Year.
In the lead up to Thanksgiving spot rates maintained their record levels. Thanksgiving is one of the busiest food shopping events of the year, driving higher volumes of turkey, sweet potatoes and cranberries in the week, but more so this year due to the pandemic and increased numbers of consumers celebrating at home.
It's also the busiest shipping week of the Christmas Tree season as retailers position inventory in readiness for the next week's traditional spike in post-Thanksgiving demand. On top of this, it's also the toughest week of the year for load planners and dispatchers as they mix and match loads to route drivers’ home for the break.
In the week ending November 29th, DAT Solutions reported that their load board activity slowed with carriers, brokers and shippers taking time off for Thanksgiving. But for the freight that did move, prices were at a premium, with rates rising on most high-traffic lanes.
Rail trends up on intermodal
Total intermodal traffic on U.S. Class I railroads was up 11.5 percent year-over-year last week, beating the prior four-week moving average of 10.8 percent. The Western rails led the way: BNSF intermodal volumes were up 13.1 percent year-over-year, and Union Pacific’s intermodal volumes were up 12.1 percent year-over-year.
Meanwhile, the national average intermodal spot rate made a strong move up 5.2 percent to $2.61/mile as rejection rates on the West Coast broke 10 percent and fell in Chicago, Joliet, Illinois, and Savannah, Georgia. Memphis, Tennessee, rejection rates jumped from near zero to 4 percent.
U.S. freight-rail traffic continued to make up lost ground last month, as railroads hauled 2,036,889 carloads, containers and trailers in November, up 3.1 percent compared with November 2019's level, according to the Association of American Railroads (AAR).
At Wagner Logistics
As we enter this home stretch in 2020, I continue to be thankful or the team at Wagner and their commitment to safely and efficiently caring for the needs of our customers. Heavy order volume through Black Friday and Cyber Monday made for a very long, long weekend it’s important that you are all recognized for that outstanding effort.
While being a tough year, we have accomplished many projects despite the pandemic and continued to demonstrate the Wagner “Bring It” attitude by not backing down from any challenge.
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!