After some quality family time in Florida, I am back to looking at where the economy is headed, and it’s influence on the logistics marketplace. All signs are positive for the economy as the pandemic comes under control in the U.S. and consumers feel better about their collective future.
On the other hand, if you are a shipper budgeting your freight costs you are likely suffering considerable angst at where trucking and intermodal rates are. No relief is in sight.
Drivers? Still hard to come by even though pay continues to grow.
Equipment? Delays in production due to parts shortages, same goes for tractor maintenance.
Warehouses? Even though they are building them as fast as possible, materials and labor are constrained = high lease rates.
Labor? Why take a warehouse job when you can stay at home and collect higher unemployment checks?
The logistics sector is playing catch up, but the road is long and hard. Let’s look at the numbers.
Consumer outlook rising
Consumers’ confidence index in the U.S. economy rose sharply in April to 121.7 in April from a revised 109.0 in March, according to the Conference Board as more people received vaccinations, stimulus payments reached households and businesses more fully reopened. The indicator approaches the pre-pandemic level of 132.6 in February 2020.
Job prospects and stimulus checks are helping the physic of consumers.
Unemployment continues its decline
Initial unemployment claims measured by the four-week moving average, which smooths out volatility in the weekly figures, was 651,000, a pandemic low.
Jobless claims remain higher than their pre-pandemic levels—the weekly average in 2019 was about 218,000—but last week’s drop extended a downward trend since the start of this year and raised expectations for further declines in coming weeks.
Employers might have trouble hiring workers fast enough in coming months to keep up with the projected burst of economic growth.
Economists expect employers to add 7.1 million jobs in the 12 months ending in December 2021, a gain of 5 percent. That would leave employment 1.6 percent lower than in the fourth quarter of 2019.
Inflation kicks in
U.S. consumer prices rose sharply in March as the economic recovery gained momentum, marking the start of an expected months long pickup in inflation pressures.
The Labor Department reports that its consumer-price index—which measures what consumers pay for everyday items including groceries, clothing, recreational activities and vehicles—jumped 2.6 percent in the year ended March, the biggest 12-month increase since August 2018, and rose a seasonally adjusted 0.6 percent in March from February.
Nearly half the monthly increase was due to a 9.1 percent jump in gasoline prices, which have climbed partly due to production problems following severe winter storms, economists said.
The so-called core CPI, which excludes the often-volatile categories of food and energy, climbed 1.6 percent over the prior year, and was up 0.3 percent in March from February.
Retail sales jump
U.S. shoppers boosted retail spending by nearly 10 percent in March as federal-stimulus funds made their way to households, warmer weather set in and the economy reopened more fully from pandemic-related restrictions.
Retail sales, a measure of purchases at stores, at restaurants and online—jumped 9.8 percent last month, according to the Commerce Department. The increase was the largest monthly gain since last May, during the initial bounce back from lockdowns early in the pandemic.
Shoppers spent more across several categories, with double-digit gains in sales at restaurants and bars and on clothing, electronics and sporting goods. Spending increased at physical and online stores.
Durable goods sales rise
New orders for durable goods—products designed to last at least three years, such as computers and machinery—increased 0.5 percent to a seasonally adjusted $256.3 billion in March when compared with February, according to the Commerce Department.
Orders have increased 10 out of the last 11 months. Low business and retail inventories have translated to increased demand for manufacturers for much of the past year. Supply-chain issues continue to constrain production and delay some shipments.
Manufacturers in purchasing managers surveys have in recent weeks reported a continued upswing in activity despite struggles to source raw materials.
Now hiring – trucking companies need drivers
Trucking companies are scrambling to hire more drivers as roaring consumer demand and tight shipping capacity stoke a resurgent freight market. Knight-Swift Transportation, the largest truckload carrier in North America, is the latest trucking company to raise pay. It’s wages for recently certified drivers have jumped by 40 percent or more in recent months, and its driving-school graduates are on track to earn more than $60,000 a year in their first year after training.
Yellow Corp., one of the biggest U.S. trucking companies, hired nearly 2,000 drivers and dock workers in the first quarter of 2021, and is holding some 24 recruiting events between now and July.
Trucking demand began surging last summer as the U.S. economy started to emerge from Covid-19 lockdowns, and as retailers and manufacturers rushed to restock pandemic-depleted inventories.
Rates moderate for now
In the week ending April 18th, DAT Solutions reports that flatbed spot rates continue climbing, with the national average adding another 5 cents per mile. The national average is now 81 cents higher than the same week last year and 26 cents higher than the same time in 2018 during the last capacity crunch.
Truckload rates are moderating ahead of produce season for dry vans. In March the national average rate per mile was $2.65 and so far in April the rate is running at $2.62. This rate includes fuel.
Rails see intermodal growth
Average weekly intermodal transports carried by U.S. railroads grew in the first quarter to 278,427 loads, up 13.2 percent from last year and 2.8 percent from 2019, and the highest level ever for a first quarter, according to the Association of American Railroads.
Expect intermodal pricing to mirror truckloads in terms of increase percentages going forward.
At Wagner Logistics
Wagner continues to focus on operational improvements and opening new operations. As we begin a new month, I’m excited about what the future holds in this expanding economy.
As Wagner continues to work its many projects, we would love to work with you. If you are issuing a transportation RFP or have a distribution/fulfillment project, let’s schedule a call.
We are celebrating our 75th year of history of service to our customers and would really appreciate 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!