Don’t Panic

Trucking industry employment rebounded sharply from an unexpected dip in March, increasing by 13,000 workers (seasonally adjusted), the largest monthly increase since April 2013 following upward revisions to February and March data – which will inevitably fuel longstanding debates in the industry about shifting seasonal patterns. Trucking industry employment is now 1.6 percent above its pre-pandemic peak from summer 2018. Package delivery services (+14,900) and warehousing (+16,800) also saw strong payroll gains.

Beyond logistics, the U.S. jobs market remained robust through mid-April: Private payrolls increased by 428,000 jobs (slightly beating the consensus forecast of 400,000 job gains) and the unemployment rate held steady at 3.6 percent. The participation rate continues to stagnate well below pre-pandemic norms – despite suspicions a year ago that labor force participation was being artificially depressed by temporary fiscal largesse. But layoffs have also increased in recent weeks. Outplacement firm Challenger, Gray and Christmas, Inc. reported yesterday that job cuts increased by 14 percent in April and are now higher than a year ago. For the moment, it appears that most of these workers are finding new jobs reasonably quickly (if they so desire).

The freight labor market tends to lag the freight market, and it would be unwise to overlook signals elsewhere of widening cracks in the foundation of the freight economy. Amid a suddenly softer spot market for truck transportation services, there is also a growing chorus of reports of overcapacity in the warehousing sector (see here, here, and here). For much of the past two years, indeed much of the past decade, the booming warehousing sector has provided a critical source of demand for workers who might have otherwise sought jobs in heavy trucking; the moment that trend shifts could see a sea change in worker availability and wage growth for truck transportation workers.

It’s a common refrain that freight leads the economy, though the empirical evidence of this relationship is – at best – mixed. Freight downturns occur about twice as often as broader macroeconomic downturns, so the correlation is noisy (and most certainly not causal). Still, the next few months will see an unprecedented pivot in monetary policy; the only historical guides we have are from a far different era.

Economic conditions as the United States emerged from the depths of the Covid-19 pandemic proved ripe for workers to gain labor market leverage, which has helped push consumer prices and wage gains to generational highs. Increasingly, though, it appears as if the tides could again be turning. Don’t panic… yet.

Aaron Terrazas
Aaron Terrazas is Director of Economic Research at Convoy where he researches and comments on freight markets and what freight reveals about the broader economy. Prior to joining Convoy, Aaron was a Senior Economist and Director of Economic Research at Zillow. Before that, he was an Economist at the U.S. Treasury Department’s Office of Economic Policy in Washington, D.C. He was educated at Georgetown University and Johns Hopkins University. Aaron has been a runner since age 13 and is a sucker for all endurance sports.