When Will The Unemployment Rate Increase?

The economy may be picking up steam, the jobs reports are sounding more positive; so when is the unemployment rate going to increase?  Going to increase??  Yes, increase.

It all has to do with the labor participation rate which has been in the news frequently in this cycle because it remains so high.  During a recession, and during the early stages of a recovery, many people quit looking for work because there are few jobs available.  These people are not counted as unemployed because they are not actively seeking employment and are not factored into calculating the unemployment rate.

However, as a normal recovery progresses, these people reenter the workforce in droves to compete for the many jobs being created.  Since there is still a lag time for these “reentries” to find a job, the unemployment rate can jump up for several months as the labor market resets.  You get a headline that reads:  June Shows Very Strong Job Growth - Unemployment Rate Rises.”  This sends the news commentators into a tizzy and confuses people.

But there is something unusual happening because the labor participation rate actually dropped in April as another 800,000 stopped looking for work.  The rate fell to 62.8%, a 35-year low (back before women started to enter the labor force in large numbers).

Why is the Participation Rate So Low?

Demographics

Because many baby boomers are retiring, the participation rate will remain lower than peak indefinitely.  Some economists claim this is the only reason for the low participation rate.  However, they ignore the other factors; they also ignore that many older workers were forced out of their jobs by the Great Recession and are too old to start new careers, so they retired “prematurely.”

Entitlements

Government assistance programs increased greatly after the Great Recession. Yes, these were needed to help people in true need. However, a large number of people figured out how to game the system and receive funds without making a serious effort to find work.  Regardless of your political views, the law of economics says that if you pay people not to work, you get less people working.

The Cultural Loss of the Work Ethic

There is a cultural shift going on regarding the “traditional” work ethic in the United States.  People with a strong work ethic have problems understanding this transformation and deride it, but that doesn’t mean it isn’t real.  Many people are avoiding work because they can. Whether it is the government assistance programs mentioned above or relying on friends and relatives, people are getting their basic needs met without having to work.

This cultural shift is largely generational.  I know of one company that closed a unionized plant in the north and transferred the work to a plant in the south.  However, the younger workforce in the new plant was much less productive that the old, and older, workers in the north.

Recently, MSN Money posted an article about how teenagers now do not want summer jobs. It says the number of teens with summer jobs has fallen 30 percentage points since the late 70’s.

This loss of work ethic, especially in the younger generations, has profound implications for our industry.  Older truckers are retiring and fleets need younger drivers to take their seats, but this is not happening.  FTR has been detailing the coming driver shortage and estimates there is a negative 4.3% unemployment rate for truck drivers (we need 4.3% more drivers than we have).  Truck driving is hard work and is not a desirable field to a generation that values hard work less.

We even saw this resistance to factory work back in 2006 when the trailer market peaked.  Some OEMs could not find enough workers willing to do factory jobs to staff their production lines.  Now that the commercial transportation equipment market is growing and OEMs are boosting line rates, this factor will come back into play.  The OEMs that gain market share in this upturn will be the ones that have the best access to new workers.

How Do We Respond To This Cultural Change?

Cultural shifts are very difficult to deal with in the short-term. Here are several of the factors in play regarding truck drivers:

Pay

Of course wages have to increase due to the forces of supply and demand, however things are jumbled up.  Because new workers value the job less than current workers, you will have to pay them more.  Two-tier wage plans are common in the auto industry, but there the current workers make more than the new ones and it is fairly easy to implement.  The situation now in trucking is an implementation nightmare.  You won’t find this one discussed in any economics books because it is caused by a major cultural shift.

Work Conditions

There will have to be major concessions to improve work conditions, and not just the obvious ones.  The younger workers have different needs and different viewpoints which require different solutions.  Distribution and warehouse systems may need to change significantly in the long run to accommodate this shift. 

Technology

A younger generation raised in a technologically advanced world expects their workplace to be technologically up to date.  It is the equivalent of an experienced worker starting a new job and being issued a Commodore 64.  New workers will not stay with fleets where the technology is not up to their standards, and their standards happen to be higher than yours.

Training

Very affordable training must be available.  Younger workers will expect training to be easy, accommodating to their needs, and inexpensive.  We should lobby hard for increased government assistance in this area.  Considering all the regulations that the government is imposing on trucking that hurts productivity and exacerbates the driver shortage, here is one thing it could do to help us. Come on Uncle Sam, you owe us on this one. 

This post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)

The Economy Is Thawing Out

“Frozen” isn’t just a hit Disney movie, but a description of the U.S. economy in Q1.  But this economic “performance” was no comedy and the initial GDP estimate came in at a paltry 0.1%.  This caused economists to go into full panic mode and to question when economic growth will resume.

And to this I say: Chill.  Okay, that’s not the right term in this instance.  Alright then: Thaw. As in the economy on some days in January and February was literally frozen.  Snowstorms, blizzards and bitter cold shut down economic activity in some locations and severely limited commerce in others.

Some economists claim that the anemic Q1 GDP “can’t all be blamed on the weather”.  I guess that’s true, but this was the most economically damaging winter since 1978.   And 35 years is too long for anyone to remember how that works (similar to forgetting how a recovery looks in my previous post).

It is very difficult to measure the full impact of the weather in Q1. I don’t have insight to how all industries were impacted, but I do have insight on how the commercial trailer industry fared.  I estimate that January production was reduced by 10% due to weather related factors.  Production was slowed also in February to a lesser amount.  The trailer industry is very representative of the U.S. manufacturing as a whole.

Another measure was the capacity constraints that showed up in the FTR freight measurements in Q1.  For example, YRC said Q1 freight flow displacements including service delays, pattern changes, and productivity losses, reduced profit by approximated $20 million. Shippers had trouble

There were many unexpected "Ice Road Truckers" this winter

moving goods during the severe weather conditions (no surprise there) but when freight doesn’t move productively, commerce gets restrained and economic growth suffers.  This may be a simple concept, but it is something the government bureaucracy should be aware of when the slew of planned trucking regulations start to hit.

Further evidence of the weather impact is the government data reporting non-farm productivity fell 1.7% in Q1 after being up 2.3% in Q4, 2013.  Manufacturing hours dropped 1.4%, and remember, Q4 numbers are impacted by the holidays.  Yes, the weather had a huge impact on manufacturing.

Weather issues also impacted the consumer side.  When you are “snowed in” you are not out “consuming”.  You are not going to restaurants, you are not shopping, you are not purchasing services, and you are not traveling.  Some of this business is recovered after the thaw, but not all.

The other thing you see is a slew of economic good news after conditions returned to “normal”. Retail sales, auto sales, manufacturing, industrial production and the leading economic indicators all started flashing positives.  The Economic Cycle Research Institute (ECRI) Weekly Leading Growth Index has been steadily climbing since the end of February.  Of course some of this economic energy is catch up from the “ice age”, but not all.  I believe this “restart” will provide momentum for stronger growth in the second half of the year.

Unfortunately the news about Q1 is expected to get worse.  Economists analyzing the data expect Q1 GDP to be revised downward and of course that would mean it goes negative.  This will lead to more wailing and gnashing of teeth about the economy.  But this is the equivalent of feeling uncomfortable now about how cold it was in February.  It is much better to concentrate on the good things happening in the present and the forecast for the future.

As the hit song from “Frozen” proclaims: “The past is in the past”.  The economy was very weak at the start of year, but it’s time to let it go.

This post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)

A Real Economic Recovery Has Begun – Finally!

I was sitting in my Northeast Ohio office in 1986 when the building began to shake.  I ran out into a hallway where a group of my alarmed coworkers had gathered.

“What was that?” someone asked.

“I’m not sure because I’ve never experienced one before, but I think we just had an earthquake”, I said.

No one agreed with me, although no other explanations were offered.  Just then an older engineer, who had once lived in California, came flying around the corner and enthusiastically asked, “Hey, did you feel that earthquake?”

No one believed it was an earthquake because they didn’t know what an earthquake felt like.  I believe that an actual economic recovery has started, but people are skeptical because they either don’t know or have forgotten what a real recovery looks like.

Now this is totally understandable when you consider that the last “real recession” (I am dismissing the mild recession of 2001-2002) was in the early 90’s, which means the last “real” recovery occurred over 20 years ago.

I believe a real economic recovery started around October of last year.  It was temporarily derailed by the harsh “Winter of 2013-2014”, but is now resuming.  If fact the bad weather may have actually provided momentum to the recovery, similar to bobsledders rocking the sled backwards before pushing it forward.

There is a business district near my home that was devastated by the Great Recession.  It started showing some evidence of life two years ago, but now there are some very obvious signs of recovery:

-         There are four major construction projects in process on the outskirts of the affected region.  There is a repair facility to support the fracking industry. There are two new office buildings, one medical and one professional.  The other project is a full-service hotel.  There is still more development planned and a nearby road is being expanded to support it.

-         The business plaza in the center of the district is being totally remodeled. The owner obviously believes he will have new tenants soon.  The office complex across the street is now at full occupancy, the first time in five years.

-         There is new “high-priced” housing construction in the suburb just west of the area.  A thriving housing market existed there before the recession, but no new houses had been constructed in at least four years.

And those “green shoots” that everyone has been seeking for the last five years are suddenly appearing everywhere.  Hotel usage is up, unemployment claims are down, manufacturing keeps improving, the energy sector has been revived.  Several economic indicators have begun flashing “green”. Yes, this is what the beginning of a real recovery looks like.  It’s just taken forever to get here and we have been disappointed so many times in the past that we are not convinced. 

There are two sectors lagging the recovery: Housing and Employment.  Housing has lagged the recovery from the beginning because it was the last to crash, the worst to crash, and it hit bottom after the recession had officially ended.   Therefore its recovery started late and it has been slow.  This was a different type of recession and this is a different type of recovery.  Usually housing leads us out of a recovery, this time it will lag, but not prevent, it from happening.  Credit is still tight, but once the financial markets fully heal and the job market improves, housing will grow just fine.

The unemployment rate is headed down. It is at 6.7%, 80 basis points lower than a year ago.  Normally this would be great news if it wasn’t for the drop in the labor participation rate.  The Great Recession created significant structural unemployment due to the high numbers of older workers with non-transferable skills who lost their jobs.  These people are going to have trouble finding work even in a recovery.  This makes the unemployment situation difficult to gauge.  I just overheard two business owners (one in manufacturing, one in service) bemoaning the fact that they both were having problems hiring enough workers.  With the increase in business activity, job growth has to follow soon.

The conventional wisdom is that the recovery is still lethargic.  This week a Wall Street Journal headline proclaimed: “Sluggish Recovery Proves Resilient”.  Only 26% of economists in the latest WSJ poll believe GDP will hit 3.5% or higher in either the Q3 or Q4.  The FTR forecast is in line with this thinking, with Q3 and Q4 at 3.1%.

But I believe the “recovery” train has left the station and will only pick up steam the rest of the year. If this is true, growth will be between 3.5% and 4.0% in Q3 and Q4.  It would start to look like a real recovery at long last.

The question that everyone has been asking for the last several years is: How long is it going to take to recover from a recession this severe?  The answer: This long. 

This post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)

The Trucking Market is Feeling Good - Will the Economy Follow?

As I entered the exhibit hall at the Mid-America Truck Show last week, I could almost hear the Truck Market singing:

I never seen such a beautiful day
Looked like everything is coming my way
Feel like a bird just leaving a cage
Looks like my luck is
Getting ready to change

Oh yeah, welcome to the show indeed.  After suffering through the Great Recession and the “not so great” recovery, the industry has shown some very positive signs lately and these were all evident in Louisville.

You could see it:

-          The hall started to fill up fast and by afternoon the place was jammed with people.  When you have to be careful to walk around people “inside” the vendors’ booths, you know things are rocking.

-          Companies featured newer, flashier, displays (marketing budgets are back!)

-          Vendor space was full, there were even a couple trailer manufacturers in the far West Wing.  There were some foreign manufacturers with displays, relying on interpreters to make their sales pitches.

You could feel it:

-          There was a “buzz” about the place, an aura of excitement when you walked through the doors.  The truck market was back and people were giddy.

-          Everybody was smiling again.  The handshakes were strong and plentiful. Nothing like an increase in business to lift people’s spirits.

-          It was loud.  You had to stand close to people and talk louder.  This added to the very positive atmosphere.

You could smell it – and what you smelled was money!:

-          There was business being conducted, there were real deals being discussed.

-          New products were in abundance, because companies now anticipate increased sales. Competition is back baby! Because there is something to compete for.

-          One manufacturer beamed that they were building a new plant after having to close two older ones when the bad times hit.

The sun just came out
From behind a cloud
Now I feel like shouting out loud
Hallelujah, let the sun shine in
I'm feeling alright again

And it’s no mystery why the mood is so good.  Truck OEM’s are increasing production due to strong orders and trailer OEM’s are following suit to a lesser degree.  Of course this is putting pressure on suppliers to keep pace.  This is “good” pressure however, that we haven’t seen in several years.

This good mood is also contagious.  One of the reasons for the recent increase in orders is “buyer confidence”.  Just as increased consumer confidence precedes retail sales, increased buyer confidence in our industry leads to truck and trailer orders.  We don’t measure this at FTR (Freight Transportation Research), but it is apparent that fleets are more confident of steady freight growth and increased business than they have been in a long time.  People in this industry talk a lot and small and medium sized fleets often take their cue from what the large fleets do.

I wore out nine pairs of shoes
Walking this old floor
Never sang nothing but the blues
Now I'm singing me a brand new song
Standing in a new pair of shoes

The better news is that because the trucking industry is a leading indicator of the general economy, the increase in business activity and the positive business mood should be prevalent in other industries by the end of the year.  If that is the case, the economy could be experiencing a real recovery before too long. Yes, it sure feel good, feeling good again!

Sure feels good feeling good again
Sure feels good feeling good
Feels good again

(Sure Feels Good lyrics – Elvin Bishop)

(This post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)

The Housing Market Is Cramping Up

The housing market keeps sputtering along.  While disappointing, this should not be surprising.  Housing was the last big segment to hit bottom.  This was a bubble-busted collapse. Housing had so far to fall that it did not hit bottom until the recession was almost officially over.  Housing starts were still dragging the bottom of the cycle months after the recession had officially ended. 

Consequently, housing started its recovery after other segments of the economy and has mirrored the trends in other industries.  It has been a long, tedious, series of fits and starts.  Just when you think promising growth has started, it stalls out.

Because of the housing’s impact on freight and the general economy, it’s a good time to check in on the state of this industry:

Housing Starts:

February Report: 907,000 (annual rate). -0.2% vs. January, -6% y/y

Trend: Housing Starts began to recover in 2009, but unfortunately haven’t gotten very far. 

Based on history and population growth, a healthy market now would be around 1.5 million starts.  This means that even when using December’s higher number, we are still 30% below where we need to be.  FTR is forecasting Housing Starts to average around 1 million (annual rate) in Q1 and then grow slightly each quarter.  This would make 2014 a good year compared with the last few, but still poor compared to the 1.5 million baseline.

Building Permits

February Report: 1,018,000 (annual rate). +7% vs. January, +7% y/y

Trend: Building Permits started to increase in October 2013 so it appears bad weather has hurt the total this winter.  Building permit numbers should continue to rise each quarter at a modest rate.

Home Builder Confidence

March = 47, February = 46, March 2013 = 44

Trend: The index had increased for eight straight months before declining significantly in February.  The index registered its second straight month below 50.  A reading below 50 indicates builders are negative about future market growth.

 

New Home Sales

January Report: 468,000 (annual rate). +10% vs. December, +2% y/y

Trend: Positive, but like Housing Starts, we have a long way to go.  New Home Sales have been very slow to recover and we should be above 700,000 in a healthy market.

Existing Home Sales:

February Report: 4.6 million, -0.4% from January, -7.1% y/y

Existing home sales are actually declining after hitting a peak in mid-2013.  They are back to where they were in 1998.

Home Inventories

March Report: Inventories are increasing moderately, but remain at very low levels. Inventories will have to increase to fuel a recovery and support normal sales levels, but sales are not sufficient to cause inventories to rise just yet.  This is a symptom of our cautious business environment.  Some analysts believe the very low inventory levels are holding back the housing recovery by pushing up prices and stifling demand.  Preliminary reports (NAR) have existing home sales up 6% in March.

Housing Prices

Core Logic reports prices up 12% y/y in January.  Prices continue to rise but are still 17% below the peak of April 2006. Also, 4 million homes returned to positive equity in 2013, but over 13% of residential properties with a mortgage still had negative equity at the start of the year.

The Big Questions:

Why are Housing Starts so low?

There are fewer first-time home buyers.  College graduates who would normally buy houses don’t have jobs, have high student loan debt and are delaying marriage.  Household formation was very low from 2008 to 2010.  It started to improve in 2011, but is still below the historical average.  There is large pent-up demand here, but without jobs and a growing economy this market isn’t moving.  Home builders do not need to build inventory if there are not first time buyers.

In addition many smaller builders were wiped out during the recession.  Those that survived are facing very tight credit conditions.  Large builders remain very cautious and are having problems finding enough skilled labor for the projects they have.

Why are Existing Home Sales So low?

Buyers are facing tighter credit, limited inventories, higher prices and higher mortgage rates.   You still have a high percentage of homes underwater, cautious buyers and sellers, and limited mobility due to a sluggish job market.

What happens next?

The housing market may
be taking a "squat"

Housing usually leads the economy, but it was the last sector to crash and thus has lagged the economy since 2009.  For housing to rebound, the general economy has to be functioning in a normal state.  There has to be growth and stability to support the housing market before it can flourish.

Compare it to a world-class distance runner who has a bad case of the stomach flu.  All the parts that make him world class are still functioning well.  His legs, his feet, his lungs are all exceptional. But he is not going to run very fast, nor very far, under these conditions.  Other parts of this economy: employment, financial, risk-taking, consumer confidence, are going to have to heal before housing has a solid base to launch.

(This post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)

Raiders of the Lost Recovery

We Were Raided

Once upon a time there was a land where the people lived a very carefree life.  There was dancing and parties and frivolity.  People built houses and businesses and careers.  And the moneymakers took risks, even big risks, with no fear of any harm.

Then without warning the raiders came.  They stole, they killed, they destroyed.  The land was devastated.  Things people spent their entire lives building lay in ruins.  The people in the land were hurt and terrified.  Almost everyone had suffered some type of loss due to the raiders.  Those who had escaped the raid, felt fortunate.

Where Is That Recovery ?

The overwhelming emotion of the people was fear.  They were all afraid the raiders might return soon and destroy what remained.  Instead of working hard to rebuild the land they had, the people very slowly, very cautiously started to move forward.  Some rebuilt very slowly, some rebuilt much smaller and some reasoned it was not worth rebuilding at all.  There was no sense in taking any risk, since the raiders could return and destroy it again. 

The Great Cautious Recovery

Fear is one of the strongest human emotions and the Great Recession was one of the most fearful events this generation has ever faced.  And fear impacts economic decisions.  For a long time economists tried to downplay this impact, but the connection between economics and emotions is now an active field of study.

So now we have the “Caution Economy”.  It’s like a traffic light that is stuck on yellow. Things are messed up, no one has any experience dealing with this and it causes consumers and businesses to operate slowly and dysfunctional.

Everyone is overly cautious because we all came through this crisis together and now everyone is moving forward, very slowly, as a group.  It is becoming part of our culture.  Risk-taking isn’t valued in this economy, it is frowned upon.  The result is that in the fifth year of this economic recovery, progress is still excruciatingly slow.

It’s no surprise that various stimulus programs did not work as well as expected.  When we are fearful, we are not in the mood to be stimulated.  And historically low interest rates means the government is begging us to borrow money.  But we don’t, because we are still afraid we could lose it.

And we had legitimate reasons for not being more confident about the future.  The government does not give us confidence, the world economy does not give us confidence, and the financial markets do not give us confidence.  The government in many regards has made things worse by displaying a dangerous lack of knowledge of how businesses function.

We have been stuck on “slow” for so long that we are being conditioned to believe this is “the new normal”.  You can read articles every day that include: cautious, low-risk, modest, sluggish, etc.  We have repeatedly heard that businesses are “keeping a tight rein on spending” and this reinforces our own cautious behavior. Therefore the mass caution leads to a sluggish economy, which of course leads to more caution.  We are swimming in circles afraid to venture out too far because there might be sharks in the water.

A Cautious Transportation Market

This “Caution” economy has impacted the transportation market in several ways:

-         Very “choppy” freight demand has made it difficult to make decisions in the short-term or plan in the long-term.

-         There was significant over-capacity in the market that has taken an extended period of time to be depleted.

-         Equipment has been run a longer period of time which has disrupted traditional trade cycles.  This has occurred because trucks are being run less miles due to weak freight demand and trucks and trailers being run more miles due to the economic circumstances.

-         “Rehiring” has been slower for suppliers, support industries and non-driver fleet personnel because companies remember how painful it was to lay off workers when our industry was decimated by the recession.

-         Industry equipment purchases hovering around “replacement demand” levels. 

-         Part of the driver shortage might be the reluctance of workers to re-enter the industry and new workers to enter this industry after the big layoffs when the recession hit.

Signs of Life?

Thankfully we are seeing signs of life in the industry.  The recent increases in truck and trailer orders show that fleets are becoming much more confident of future business growth.  And confidence is contagious. As soon as some people begin taking risks, more people become comfortable doing the same.  Another factor is “pent-up demand”.  You get significant pent-up demand during periods such as this because even though fleets needed new equipment, they were cautious and “were keeping a tight rein on spending”.  Pent-up demand is tricky because you know it exists, but it is very difficult to measure.  The problem for equipment manufacturers is that pent up demand tends to be unleashed without much warning.  Once some fleets start to buy, they all start to buy.

Because trucking is a leading indicator for the general economy, the recent upswing in equipment orders is a very good sign for future GDP growth.  Although some recent economic reports have been negative, the bad weather conditions in December and January had a bigger impact on the economy than economists realize.  Look for the economic indicators and the outlook to improve in the months ahead.

(This post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)

There Is Actually An Employment Shortage

In December I attended the Chicago FED Economic Outlook Symposium.  During a presentation on the steel industry, the speaker noted that companies are having problems hiring enough production workers.  Then, during a presentation on the housing industry, the speaker noted that builders can’t find enough skilled tradesmen for the jobs available.  Finally, an auto industry analyst stated that there are unmet employment needs there as well.

This certainly isn’t good news for the trucking industry.  My company, FTR (Freight Transportation Research), is estimating the current driver shortage at 200,000 and, based on the presentations in Chicago, trucking fleets will not only be competing for workers inside the industry, they will be competing with many other industries.  And this situation will only get worse, considering the potential of stronger economic growth and that we are only at the start of the baby-boomer retirement wave.

I recently found a newspaper article from 2007 that predicted a huge worker shortage (in general) beginning in 2010.  While initially I found the headline humorous, the Great Recession did not eliminate this worker shortage, it only delayed it.  It would seem the worker shortage predicted in the article began in 2013.

But how can there be a widespread labor shortage with unemployment still near 7% (and “real unemployment much higher)?  One factor is “structural unemployment.”  Structural unemployment occurs when unemployed workers lack the skills needed for the jobs available or do not live in the part of the country where job openings exist.

The Great Recession created significant structural unemployment.  Many workers lost jobs they had worked in for 10, 20, or even 30 years.  Their jobs skills are either not transferable to other industries or not adequate in a changing, high-tech oriented economy.  In addition, the housing bust made workers less mobile.  It is difficult, in some cases impossible, to sell your house if you are “underwater” or if you live where housing prices are depressed. (I identified the structural unemployment problem created by the recession in October 2009, one of the first people to do so).

But structural unemployment cannot fully explain the labor shortage.  I believe there is a new factor which I will call “cultural unemployment.”  Cultural unemployment occurs when the jobs available are not desired by unemployed workers due to cultural patterns.  You could also call it “Ugly Job Syndrome.”  Factory and truck driving jobs now fit is this category.  These were desirable jobs a generation ago, but the culture has changed and now a percentage of the available labor pool is avoiding these professions.

Also, government policies have contributed to this cultural unemployment.  Cheap college loan money led to an over-supply of college graduates (and an under-supply of blue collar workers), and an increase in the social “safety-net” allows more people to eschew physical and more demanding labor. And the recent report by the Congressional Budget Office predicts that the Affordable Care Act will motivate people not to work full-time, if at all.

So as bad as you think the driver shortage is, it probably is even worse given the overall labor market.  And due to regulation, demographics, and economic cycles, it will

Time to train more truckers!

continue to exacerbate.  This is going to cause significant changes in the trucking industry as companies respond to the changing labor economics.  There is no single solution to this problem.  Yes you will see higher wages and shorter routes, but you will also see changes in the distribution system (more warehouses, perhaps) and more and different types of intermodal.  It will also force carriers and shippers to develop creative solutions that maximize the number of drivers and maximize the efficiency of these drivers.  This will take some hard thinking and analysis.  Time to start thinking now.

(The post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.