April’s Fools

The U.S. labor market continued its upward trajectory in March but tremors in the freight market signal that the goods economy – which has driven U.S. economic growth for much of the past two years – may have turned a corner.

Nonfarm payrolls increased by 431,000 in March according to data published today by the Bureau of Labor Statistics (BLS), and the unemployment rate fell to 3.6 percent – a tenth of a percentage point shy of its pre-pandemic low and two-tenths above the boomtime unemployment lows of the late-1960s. It is a remarkable turnaround since the Covid-19 pandemic first rattled the global economy exactly two years ago, leaving record numbers of Americans out of work.

Key logistics sectors were mixed – with trucking firms shedding 4,900 workers (though trucking payrolls for the prior two months were revised upward by a combined 8,600 jobs), parcel delivery payrolls increasing by 6,700, and warehousing and storage firms adding 4,300 to their headcounts (all seasonally adjusted). Employment in these industries is now, respectively, 2.3 percent, 28.3 percent, and 33.8 percent above where it stood on the eve of the pandemic. For truck transportation firms, March 2022 marks the first month-over-month decline in payrolls since April 2020 and — that chaotic month aside — the largest decline since September 2019 when the freight market was in the middle of a deep slump.

But according to a growing chorus of market watchers, the freight bender is coming to a screeching stop. 

If the tentative signs of a softening freight market that emerged mid-March prove durable, it’s likely that logistics firms will pause their recent aggressive pace of hiring, pull the brake on wage offers, and retreat from worker training investments. Nominal hourly wages for non-managerial workers in the transportation industry grew 11 percent in February – setting a new all-time record going back to the early 1970s. That was probably the peak. As demand for frontline logistics workers ebbs, there will likely continue to be ample opportunities in adjacent sectors such as construction, manufacturing, and natural resource exploration/extraction. 

It’s easy to forget that just a handful of weeks ago, there was lingering chatter of trucker shortages – fears that increasingly feel overstated with the benefit of hindsight. While it is true that periodic market corrections do not erase longer-term structural labor shortages, it is equally true that periodic tight markets do not necessarily imply their existence – perhaps an important lesson of the whiplash freight market gyrations of recent months.

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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.