Things appear to be booming:
- 3% GDP growth in Q2. The word on the street turned out to be more reliable than the economists’ forecasts.
- Unemployment rate of 4.4%. Economists set “full economic employment” at 4%, because it is estimated that at any time 4% of the labor force is in some form of transition. Unemployment at 4.4% indicates there are jobs available for anyone who wants them. However, this is more complicated in the current job market. There are jobs available which people don’t want either because the wages are insufficient, the safety-net is too safe, they do not prefer manual labor, or the jobs don’t match up to their college degree. There are also open jobs which require a level of technical skill lacking in the available labor pool.
- Consumer confidence spiked in August to the second highest level since 2000. The job market is growing, home prices are rising, and the stock market is booming. Times may not be as good as 2000, but it’s much better than 2009.
- Consumers are opening their wallets. Retail sales were up 0.6% in July, and the consumption numbers in the last GDP report were strong. West Coast port activity is up over 10% this year.
- Manufacturing is also steady, with the August PMI index hitting an impressive 58.8%.
- Miles driven increased 1.2% y/y in June and 2.2% in May. More people are driving to work and more people are going places, both signs of increased economic activity.
- Truck freight is sturdy. The FTR forecast is for 3.4% growth for 2017, including an impressive 4.2% y/y growth in Q4.
- New Class 8 truck and commercial trailer demand are flashing strong positive signs now, and healthy demand is forecasted to continue into next year.
And looking outside my window:
- Help wanted signs are popping up everywhere. There are two adjacent restaurants with banners near the street competing for workers. There are radio ads for skilled factory workers and truck drivers.
- The new office complex near my house finally has some tenants. There still are not many cars in the parking lot, but it appears three out of five offices are occupied.
- The “economic warzone,” which I have previously written about, is not fully recovered, but I now doubt that it ever will be. The abandoned buildings are too old, and new construction provides more attractive options for new businesses. However, traffic through this area has greatly increased.
- Likewise, traffic on the local highways seems much heavier than a few years ago.
Yes, it looks like boomtown! But how long will this last?
- The optimist says this is the surge we have been waiting on for eight years. There is renewed confidence, a more business-friendly administration and tremendous pent-up demand. This is the start of something big!
- The pessimist says this looks a lot like the top of an economic cycle. Everything appears great right before the slide begins. This recovery has lasted much longer than expected, and we are due for a drawback. Things look good now, but you never see it coming.
- The Wall Street Journal Economists Survey Panel expects growth to fall back to around 2.5% for the next several quarters – but you expected that, right? It is higher than the 2.2% the economy had been stuck at previously. Only 21% of the economists forecast growth at 3% or more in Q3 (before Harvey and Irma). The FTR GDP forecast is close to 3%.
In this mixed-up economic environment, it is unusually difficult to forecast. That’s why the economists have resorted to predicting “more of the same” for a while. You can’t fault them since most of the forecasts have been good.
When it’s this murky, I tend to be biased towards the transportation markets because they have been reliable economic indicators. These markets say there are more blue skies ahead. Of course, there were blue skies in Florida just last week. You never see it coming ……This post first appeared on the FTR website with minor changes here.. FTR is the leader in analyzing and forecasting the commercial transportation industry. For more information on FTR reports and services, please click here.)