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%.
The Call
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.)
