AUSTIN, Texas – Bob Costello, the chief economist for the American Trucking Associations, is confident that the second-longest economic expansion in U.S. history will continue – despite some signs of softening in recent months.
“There’s no reason to worry,” he said during a briefing at the group’s management conference and exhibition. “We are going to see a deceleration both in our industry and the economy, but deceleration doesn’t mean decrease.”
Several trends support his optimism.
“The labor market is strong,” he said as an example. There were 200,000 jobs created every month over the last 12 months, and September’s unemployment rate dropped to levels not seen since 1969. “There are more job openings today in the economy than there are unemployed people,” he said. “We have never seen this.”
That doesn’t mean everyone is ready to work. Available skills don’t always match up with the openings.
This year, salaries and wages are also expected to grow 3.1%, marking the first such boost in this economic cycle. “That translates into more spending,” he said. U.S. spending on goods is expected to grow 3.5% next year, with holiday sales for this year expected to increase 4.1%
Construction activity is strong, too. This year, 1.3 million new homes were built in the U.S. – the most since 2007. “Of course, when I say that everyone panics,” Costello said. But he reminded the crowd that the country was building 2 million new homes a year before the great recession, when a housing bubble came to the fore.
Factory-related spending is increasing as well, and Costello sees the new U.S.-Mexico-Canada Agreement (USMCA) as a positive, and he hopes the trade deal will be passed.
“Inventory levels throughout the supply chain are no longer a drag on freight volumes,” Costello added. Online purchases continue to demand more products to be stored near consumers. “We’ve seen an explosion of warehouses across the country,” he said.
Retail diesel prices are expected to remain flat this year, but Costello warns about a January 2020 change when the international maritime organization will cap sulfur levels for oil-carrying ships. “That is likely to put upward pressure on the prices of our diesel,” he said.
While truck sales are hot, they don’t seem to have added to capacity. “This is a replacement cycle, for a large part because you can’t find enough drivers,” Costello said. “Employment numbers are rising, but it doesn’t mean capacity is rising.”
Growth in the number of tractors purchased by large for-hire truckload fleets is thought to have more to do with those who are hiring employees to offset a drop in the number of independent contractors.
The economist also challenged the idea that higher wages would answer the driver shortage. “If this was just a question about wages, solving it would be easy,” he said. As proof, he referred to European fleets who continue to struggle to find drivers even though they offer comparatively high wages to those from countries like Romania.
“That,” he said, “tells us this is a lifestyle issue.”
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