Pick an
indicator, any indicator…
Flatbed Freight
I recently
attended a conference for flatbed fleets owners. These small business owners
are extremely bullish on flatbed freight in the second half of the year. Their
rosy business outlook mirrors some of the small business confidence surveys
that have been reported.
This is
significant, because flatbed trailers haul a wide variety of industrial freight
from numerous industries. If flatbed freight is strong, then manufacturing and
the industrial sectors should be robust as well.
The sentiment
from the fleet people is consistent with the FTR forecast which has freight
loading increasing over 5% year-over-year in the second half of the year, with
flatbed loadings up over 9%. If you choose flatbed freight as your key
indicator, the economy is looking robust in the second-half of the year.
The Employment Numbers
Normally, a
4.3% unemployment rate would indicate a vibrant labor market. If you ask
someone looking for a professional or living wage job, however, you will
probably hear the market is not as good as it seems. Sure, the job market
continues to crank out “barista-type” positions at a healthy clip, but that is
not what is needed to boost this economy.
The Labor
Department just reported that job listings reached an all-time high; however,
actual hiring is down about one-third from a year ago. This would indicate
structural unemployment (where workers lack the skills for available jobs) is unexpectedly
getting worse.
The official
unemployment rate is significantly impacted by a low labor participation rate. Aging
demographics aside, many potential workers can’t pass a drug test, and the
expansion of the safety net during the recession has created disincentives to
working. Ask any HR person at a growing company, and they will tell how
difficult it is to find new workers.
Yes, there
are a decent number of hires reported every month, but wages are not rising
fast enough to make a difference, and job growth is still not sufficient to
replace jobs lost during the recession. If you select employment as your
indicator, you expect just more of the same.
Stocks and Bonds
The stock
market is booming, reaching record highs, and some analysts are trumpeting
great upside potential. The bond market, however, is flashing yellow, if not
red, signaling a slowdown in the economy. So, if you use stocks as a predictor,
things are going to boom. If you choose bonds, look out for a bust.
Confidence Surveys
The Business
Roundtable said its survey of executive economic outlook hits its highest level
in three years. The executives are anticipating new legislation to boost
business. If you chose this indicator, it’s boom time for the economy.
However,
POTUS approval ratings are in the cellar, raising doubts that anything gets
accomplished. If you go with this stat, then the economy gets worse.
Banks Loans
Total bank
loans have peaked and have started to fall. The last three times this occurred,
recessions followed. If this is your indicator, put your money into gold and
run for the hills.
The Forward-Looking Indicators
A few months
ago, I predicted stronger growth for the economy this year. This was based on these
indicators showing marked improvement. However, the current numbers, while
still positive, have slipped a bit. What looked like a trend now appears to be
just a normal, moderate upcycle. The type we’ve seen repeatedly in this
recovery. These indicators would suggest a strong Q2 and Q3, with a falloff in
Q4.
The Economists
The Wall
Street Journal economist survey has Q2 GDP at 3.1% (range from 1.6 to 4.0%), Q3
at 2.6%, and Q4 at 2.5%. GDP for 2017 is 2.3%. This makes sense; if there is no
clear direction, you must forecast more of the same.
Conclusion
Pick an
indicator, any indicator. Uncertainty still rules as there is no clear
direction. In the end, though, it appears we are going to continue to go
nowhere slowly.
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.)
