LAS VEGAS, Nev. – The US economy is growing at a snail’s pace – slow and steady – and that’s both a good and bad thing, according to industry experts.
John Larkin, marketing director and head of transportation capital markets research at Stifel, Nicolaus and Co. addressed the audience at the Truckload Carriers Association’s annual convention today to discuss what he believes is in store for the American economy in the coming 12-18 months.
He told the audience that even though things may be looking positive for the US economy because its currency is getting stronger, essentially, it is just “the best looking house in a crummy neighbourhood.”
“The US is not growing at a break-neck pace,” he said. “Our currency is strong so it makes it hard for us to export because everything we build or grow or manufacture is 25% more expensive than it would be had the currency not take this big powerful move.”
Larkin said that since the 2008 recession, the country has been unusually slow in recovering; only growing at a rate of 2%.
The two major components of economic growth are population growth, which isn’t doing well, said Larkin, since people are getting married later and not having as many children, and productivity which hasn’t been strong, either, because of the unemployment rate.
In addition, Larkin said that from 2015-2016 consumer confidence declined because there is “some fear that there could be another recession forthcoming since this recovery has been very long in the tooth.” He added that people aren’t spending as much as they used to. This in turn causes the retail supply chain to become sluggish and suppresses transportation demand.
“People really aren’t spending what they’re saving at the gas pump,” he said.
Though people may not be spending as much, Larkin said that he doesn’t see a recession in the future.
“The rule of thumb here is all economic recessions are preceded by freight recessions, but not every freight recession predicts an economy recession,” he said. “It looks like we are going to scrape by without a (economic) recession.”
He said he believes that the most likely economic scenario for the near future is “continued slow, steady growth, because there doesn’t appear to be a catalyst to push us off a cliff into a recession barring some sort of terrorist event or external issue.”
And if Larkin is right, and the economy continues to grow at this slow place, he warned that the driver shortage will seem to suffocate the trucking industry even more so.
“Driver shortage continues to be a huge problem,” he said. “It is not going away with the slowdown in the economy. It’s no secret; the quality of drivers is declining. (We will be short) 250,000 drivers by 2022, which is rapidly approaching.”