Unemployment claims ease
Worker filings for unemployment benefits dropped to 712,000 last week, nearing their lowest level since the pandemic fueled a surge in layoffs last March.
Jobless claims, a proxy for layoffs, have eased in recent weeks as last week’s seasonally adjusted total was about 200,000 below an early January peak.
The four-week moving average, which smooths out volatility in week-to-week numbers, was 759,000 for the week ended March 6, slightly higher than the previous pandemic low recorded last November.
Household income rising
The amount Americans received from wages, investments, and government programs rose 10 percent in January from the previous month, according to the Commerce Department. The increase was the second largest on record, eclipsed only by last April’s gain, when the federal government sent an initial round of pandemic-relief payments. Household income has risen 13 percent since February 2020, the month before the pandemic shut down large segments of the economy.
January’s increase in household income was almost entirely due to federal pandemic-relief aid included in a $900 billion stimulus program signed into law in late December. That package included one-time cash payments of $600 and a special weekly unemployment benefit of $300 that the government started sending to households.
The passage of the $1.9 trillion Covid-19 aid bill extending additional pandemic aid, including $1,400 per-person payments, even more cash is flowing to consumers.
Americans last month spent a chunk of their income, boosting spending by 2.4 percent, the first gain in three months. Households spent broadly on goods, particularly long-lasting big-ticket items. Spending on services also increased for the first time since October.
But households also stashed much of the money: household savings totaled $3.9 trillion last month, up from $1.4 trillion last February.
Bottom line, consumers are going to spend.
The Institute for Supply Management's (ISM) purchasing managers' index for the manufacturing sector rose to 60.8 from 58.7. The level indicates the fastest rate of growth since 2018 and notches a ninth straight month of expansion.
ISM's index of new orders rose to 64.8 from 61.1. The Production Index climbed to 63.2 from 60.7, while a gauge of inventories fell to 49.7 from 50.8.
Readings above 50 signal expansion, while those below the threshold indicate contraction.
Of the 18 manufacturing sectors tracked by ISM, 16 reported growth through the month. Only the printing and petroleum and coal industries reported shrinking.
Strong activity has aided the broader economic recovery, but supply-chain constraints have kept the industry from growing even faster. An index tracking backlogged orders rose to 64 from 59.7, its highest level since 2004.
The shortage has also lifted materials prices. ISM's prices index gained to 86 from 82.1.
A similar manufacturing metric from IHS Markit also gained. The firm's headline measure dipped from its highest level in roughly a decade, but costs rose at the sharpest rate since 2011. Selling prices accordingly rose at the fastest pace since 2008, according to a press release.
It’s a good time to be a trucker
All key performance indicators (KPIs) are at their healthiest levels in years. There was some seasonal giveback in operating ratios but the bull market for freight is alive and well; the question is how long it will last. At this point, the answer is longer than previously thought.
The medium-term outlook and visibility for freight, at least until many Americans are vaccinated (likely second quarter) remain strong.
Negotiating leverage still heavily favors the carriers due to tight capacity, and thus they can be choosy with respect to customers and fright selection, which has reduced deadhead mileage and increased yield.
The primary canary in the coal mine that could signal a premature end to the truckload bull market is new Class 8 orders, which have exploded and are running at multidecade highs. However, one would note that it takes six to nine months for delivery and, at least up to now, carriers have had tremendous difficulty seating trucks for a host of well-publicized reasons.
Spot rates and contract rates are starting to converge as the 2021 bid season ensues and were it not for all-time record-high spot rates in the aftermath of a nearly nationwide winter storm, one would expect contract rates to surpass spot rates shortly. Most large, publicly traded truckload companies’ management teams are calling for at least high-single-digit annual contract rate inflation in 2021. This should further improve carrier profitability, gradually ease tender rejections, and improve routing guide compliance moving forward.
DAT solutions reports that in the week ending March 7th, the roads were clearing and carrier networks returned to balanced normal levels. Volumes were the same as the week before the polar vortex slammed the country, yet shipments have not caught up.
The national average spot rate increased and is close to aligned with contract rates.
March to date: $2.71 per mile as compared to February at $2.40 per mile.
Intermodal drives rail volume
U.S. railroads logged an 11.4 percent increase in traffic for the week ending March 6, including a 1.1 percent increase in carloads and a 21.5 percent percent gain in intermodal volume compared with the same week a year ago, according to Association of American Railroads (AAR) data.
The railroads reported a total 232,494 carloads and 282,641 containers and trailers for the week. Five of the 10 carload commodity groups tracked by the AAR posted increases during the week, including coal, grain, farm products (excluding grain) and food. Commodity groups that posted decreases included chemicals, nonmetallic minerals and motor vehicles and parts.
For the first nine weeks of 2021 compared with the same period in 2020 U.S. railroads logged 4,459,289 carloads and intermodal units, up 1.7 percent.
At Wagner Logistics
At Wagner we continue with multiple projects and with the Southern California facility in operation we will be opening in Alabama and Detroit next. Meanwhile the testing of our robots continues as we look to drive productivity and accuracy in our fulfillment operations.
As the weather warms and we look to the second quarter I’m excited about the fast start to the year as Wagner continues to add business while focusing our engineering talent on improving existing customers.
Do you have a transportation RFP or distribution project this year? We are celebrating our 75th year of history 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!