Supply Chain Blog
Let me start this week’s blog by thanking all the members of the Wagner team for their performance over the last six months. Despite a deliberate crash in the economy and significant health concerns, you have come to work to care for our valued customers. Labor Day has come and gone but my admiration for the quiet dignity of our front-line workers endures. Thank you for “Bringing It” every day.
As the economy claws its way out of the depths of the April/May free fall the trucking industry is surging with rates exploding to the upside. Likewise, industrial real estate continues its climb as does labor cost.
The Bureau of Labor Statistics reported that truck transportation jobs rose by a solid 10,000 in August on a seasonally adjusted basis after adjusting July jobs upward.
Despite slow rail volume, railroad employment increased as well. Seasonally adjusted rail jobs ticked upward, a reversal from their fairly relentless decline that goes back before the pandemic. They were reported at 145,400 jobs, up 100 jobs. I know, its small but shows a reversal in the trend.
Let’s look at the numbers.
When the freight market cratered in April and May, the Small Business Administration oversaw the disbursement of $7.6 billion in PPP loans to 11,738 trucking companies helping to bridge carriers from a nightmare market to today’s robust marketplace.
If transportation is the canary in the coal mine, it’s hard to believe that we are in a recession now. In fact, there are those who say we are no longer in recession.
Trucking capacity has tightened at a time when freight volume is growing making a perfect storm for shippers as they experience escalating freight rates. Shades of 2018!
I’m not looking at the world through rose colored glasses and realize that while the Covid pandemic seems to be easing, we still have massive unemployment and people are struggling as they face evictions and bankruptcy. My point is there is a lot of positive news if one is inclined to look for it even though the pandemic is long from finished.
The bottom line is that the good news is legitimate and reminds us that the economy is more resilient than many think. As Warren Buffet said, ‘don’t bet against the USA.’
Let’s look at the numbers.
Our country is facing growing doubts about the prospect for a sustained economic rebound due to the nation’s uneven public-health response to the coronavirus. Even as a trillion-dollar economic package evolves in Congress, the nation struggles with the biggest outbreak since the Spanish Flu pandemic of 1918.
Will states revert to the measures we saw in April? We don’t know, and that uncertainty continues as leaders seek a balance between public health and maintaining the economy/employment.
Meanwhile, there are plenty of data that points moving in a positive direction. With the resurgence of the virus it remains to be seen that these numbers will continue grow in a positive direction.
There is the Census Bureau’s report that retail sales jumped 7.5 percent in June after surging 18.2 percent in May.
And then there is the report that inventory throughout the supply chain, relative to sales, fell significantly in May (data is lagged one month) after spiking to an all-time high in April. While still elevated, the reduction is also a good signal for the supply chain. Don’t be surprised if it came down again in June, especially for retailers.
Let’s look at more numbers.
People are returning to work and the economy is showing signs of improvement, but we have a long way to go until things get back to “normal”. Economists are predicting some semblance of normalcy in 2021. It hinges on finding a vaccine so that people feel safe resuming their routines of shopping, working in an office, attending a concert, going to a sporting event, or just having friends over dinner.
The economy opened somewhat nationally but now we are seeing states like California reining back their opening plans. Florida, Arizona, and Texas are seeing a surge in virus cases, so the future is uncertain.
In the meantime, industries have resumed business, retail sales are climbing, and jobs are being reinstated. As an example: year-over-year June 2019, retail sales were up 1.1 percent, the first time since February that retail sales posted a year-over-year gain.
This is reflected in the higher volume of freight moving across the country.
Let’s look at some numbers.
After the disaster that was the second quarter, I’m looking forward to seeing improvement in Q3. We have election backbiting, resurgent Covid, civil unrest, and killer hornets as mood killers but make no mistake, the economy is slowly returning to positive territory.
Retail is bouncing back; housing is rebounding and manufacturing is gaining. Consumers are spending and durable goods orders look good. The ISM Index for June got back above 50 (51.3), indicating growth returning and exceeding expectations
Remember that in the history of our country we have always found a way to get through our troubles and bounce back. From my family to yours, let me wish you a happy, safe, Independence Day!
Let’s look at the numbers as we have a longer than usual list of data points.