By Apr 26, 2018 oncomments powered by Disqus
Despite the ongoing drama in Washington, the economy continues to roll with inflation rising and oil trading at the highest levels since 2014 closing in on $70 a barrel.
The job market is cresting and wages are rising, consumers will do their part as we head into spring with warmer weather on the way across the nation.
Freight markets remain robust with more loads available than trucks. Higher fuel costs combined with already tight capacity continues to drive freight rates upwards putting pressure on shipper freight budgets.
Electronic data recorders (ELDs) in trucks are now the law of the land and active enforcement has begun. Drivers are as good as gold to carriers as recruitment and incentive pay are increased. The bottom line is that carriers have all the freight they want but the constraint is a lack of experienced and insurable drivers. Pricing will continue to rise.
Let’s look at some numbers.
Job growth is strong
ADP and Moody Analytics report that the country added 241,000 workers in March with manufacturing showing the biggest increase in three years. Midsized companies led the growth creating almost half the jobs.
The U.S. Bureau of Labor Statistics reported that total nonfarm payroll employment edged up by 103,000 in March with employment increases in manufacturing, health care, and mining.
In March, the unemployment rate was 4.1 percent for the sixth consecutive month, and the number of unemployed persons, at 6.6 million, changed little. The good news is that over the year, the number of long-term unemployed was down by 338,000.
The Institute for Supply Management (ISM) said its nonmanufacturing index which tracks a wide range of U.S. industries, fell to 58.8 in March from 59.5 in February. It was the second straight slight pullback after the index in January hit 59.9, its highest level in ten years.
ISM’s factory index came in at a 59.3 reading after hitting 60.8 in February. Manufacturing is concerned about rising prices for materials, tied to new tariffs, threatening to slow the industry’s expansion.
A number above 50 indicates expansion while a figure below 50 signals contraction. The index still signaled solid expansion at the end of the first quarter. As one can see both indexes are in solid growth territory.
Truckers playing catch up
Trucking companies are ordering new equipment at a record pace, it’s not enough to meet shipping demand. Trucking companies in the first quarter nearly doubled their orders from a year ago, an unambiguous signal of the strong expansion in the U.S. economy. Manufacturers are running three months behind on orders. These orders demonstrate the growing financial health of motor carriers that have been making hay on escalating freight rates and benefits from the new tax law.
The spread between shipping capacity and freight demand appears to be widening as spot-market load boards have been reporting more shipments than available trucks.
Wages and benefits for truck drivers are rising as reported by the American Trucking Associations (ATA). Annual truck-driver salaries rose between 15 and 18 percent from 2013 to 2017, with growth varying based on the type of fleet and the nature of the routes.
Many private-fleet drivers earned as much as $86,000 annually in 2017, up from $73,000 in the ATA 2013 survey, on top of benefits packages that included new paid leave offers and more-generous retirement plans. The survey showed the median salary for a truckload driver working a national, irregular route at an entry-level driving position was $53,000, up $7,000 or 15 percent from 2013.
Carriers are boosting their per mile pay and offering large sign on bonuses that are incentive based. Incentives can put an additional $40,000 to $50,000 in a driver’s pocket. Some carriers are guaranteeing minimum weekly pay of $1,000 or more.
Generous 401K plans with employer match, life insurance, driver concierge services are offered to drivers. Flatbed carrier, Daseke, has even offered a stock incentive plan to retain drivers.
As I have said, adding drivers is the key component to stabilizing this economy. It’s largely a thankless job but when the economy is growing at 3 percent GDP, we have run out of driving talent.
Spot market rates jump, again
DAT Solutions reports that in the week ending April 7th, spot market rates for vans, reefers and flatbeds soared. This is despite the historical trend of a lull following the end of the first quarter.
Last week was the first week in which trucks would be placed out of service for not having an ELD. Load-to-truck ratios rose for all equipment types, indicating tight truckload capacity. The flatbed ratio hit an all-time high of 111 loads per truck.
Dry vans load-to-truck ratio edged up to 7.2 loads per truck while the average national rate per mile jumped 2¢ to $2.15 per mile.
The Association of American Railroads (AAR) reported U.S. rail traffic for the week ending April 7, 2018 showing traffic increased 3.8 percent for the week year-over-year.
Total carloads for the week were 261,898 carloads, up 4.6 percent compared with the same week in 2017, while U.S. weekly intermodal volume was 263,007 containers and trailers, up 3.1 percent compared to 2017.
For the first 14 weeks of 2018, U.S. railroads reported cumulative volume of 3,558,097 carloads, up 0.1 percent from the same point last year; and 3,759,388 intermodal units, up 5.3 percent from last year. Total combined U.S. traffic for the first 14 weeks of 2018 was 7,317,485 carloads and intermodal units, an increase of 2.7 percent compared to last year.
Intermodal is catching fire as shippers look to move their freight and can’t find trucks. Pricing for the rail option is tracking in line with the rising truck rates.
At Wagner Logistics
The team has been focused on executing start up plans at a few new sites and that has been going well. New positions are being filled and I thank the folks in our HR group for their diligence in getting quality people on the team.
Several members of our transportation team attended the TIA Capital Ideas conference and I’m looking forward to learning what the takeaways were. We are always looking for ideas in better execution in our transportation group.
What can Wagner do for you? We have been in business for 72 years and we want to hear about YOUR challenges. Let’s discuss how Wagner Logistics may help with your new distribution center project, or simply move your freight. As we say every day, Bring It!
Have a great day,
John Wagner Jr.
About Wagner Logistics
Wagner Logistics was founded in 1946 on the principle that every customer is a big deal and that continues to pervade our mentality, producing a superior customer experience. The company began in trucking and remains dynamic offering top-notch transportation, dedicated warehousing and robust fulfillment services. We strive to produce innovative solutions, in addition to our superior onboarding process which makes transitions seamless, and have been honored 17 years in a row by Inbound Logistics as a Top 100 3PL. Our customers drive our entry into new geographic markets, technological advances and everchanging distribution challenges. Where do you want to be? Wagner says, Bring It!
For more information please check out our web site at www.wagnerlogistics.com