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Economic Watch: Was 2014 Great or Not?

Was 2014 a great year for U.S. economy or not? What were the biggest influences on it and how did it affect trucking? It’s all a matter of the perspective of who you ask. HDT's Evan Lockridge offers his year-end take on the subject.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
December 31, 2014
Economic Watch: Was 2014 Great or Not?

 

4 min to read


Was 2014 a great year for U.S. economy or not? What were the biggest influences on it and how did it affect trucking? It’s all a matter of the perspective of who you ask.

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Economists, and Lord knows we have plenty of them, would likely say the economy is doing well (though some more enthusiastically than others). And there is good evidence supporting that. The broadest measure of the economy’s health, the nation’s gross domestic product, increased at the annual rate of 5% in the third quarter of the year, the strongest showing since 2003.

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The most recent numbers from a slew of economic reports that are released each month add fuel to the argument the economy is on sound footing. For instance, various readings on consumer confidence in the third quarter showed it was the best since before the Great Recession, despite slipping a bit in the final quarter of the year. Making this even more important is that consumers help drive retail sales, which account for around two-thirds of the nation’s overall economic activity.

There are plenty of other such numbers, ranging from fleet reports of record quarterly revenue and/or profits to increases in U.S. manufacturing. But let’s turn to what two highly respected economists that specialize in transportation had to say about the economy, and its biggest influences on the trucking industry in 2014.

The economists say....

“The bad weather in the first quarter was probably the most important event for trucking outside of the industry,” says American Trucking Associations Chief Economist Bob Costello. “It was a catalyst to a surge in freight after the weather, tighter capacity, and also difficulty finding drivers.”

The most recent tonnage index numbers from ATA back up his point, hitting its highest level on record in November, and one recent survey shows the driver shortage remains the top challenge for the nation’s heavy-duty fleets.

According to Costello, the driver shortage (or what some argue is a shortage of qualified drivers willing to accept current pay levels and working conditions), remains acute and even got worse this year.

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“The shortage got worse because the economy improved, freight improved along with it, and the demand for drivers increased.”

“That is reflected in significant pay rate increases, as well as other pay trends like more fleets going to guaranteed daily minimums,” he says. “The shortage got worse because the economy improved, freight improved along with it, and the demand for drivers increased.”

Noel Perry, transportation economist with the freight transportation forecasting firm FTR, says outside of trucking the biggest influence has been the 50% decline in oil prices this year and consequently lower fuel prices. This has not only been good for fleets buying fuel, but also has had a major role in stimulating the economy.

Also, as positive developments in the overall economy often translate into the same for the trucking economy, Perry notes a “strengthening economy sustains good freight growth and pushes back the possibility of recession two to three years.”

Perry agreed with Costello on the economic influences of the driver shortage, saying bad winter weather, which the nation saw plenty of in the third quarter, too, makes the “driver shortage go critical.” Perry added that with capacity utilization above 100% for much of 2014, this gives us a good preview of conditions in two years when the next wave of regulatory drag hits.

While the views of two economists don’t make a scientific survey, the numbers appear to indicate that the economy and trucking are in good shape.

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But there’s one number that some economists say is still troubling.

What about wages?

Sterne Agee Chief Economist Lindsey Piegza offered a more sobering view of the economy in a note to investors just before Christmas, commenting on the effect of new home sales on the economy, which fell 1.6% in November.

“Despite noticeable improvements in the labor market, consumers are still struggling with minimal income growth, dilapidated savings, and in some cases, limited access to credit, all restraining home purchases,” she said.

“While consumers may be out spending the extra cash savings from low gas prices, there isn't enough savings, however, to accommodate large-ticket purchases such as homes.”

A article on U.S. News calling 2014 “The U.S. Economy's Breakout Year” sounded a similar cautionary note: “If you don’t see wages picking up over the coming year, it means there's something fundamentally wrong with the recovery,” Gennadiy Goldberg, U.S. strategist at TD Securities, told the reporter.

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The bottom line is that if you are in trucking, or heavily involved in the stock market, which saw an 8.5% annual gain for the Dow and its sixth annual gain, plus even bigger gains for the NASDAQ and S&P, then 2014 was likely a good to very good year.

However, it's fair to say this is not felt by a big portion of U.S. households, where you find Joe Six-Pack and the rest of his family, who endured the brunt of the Great Recession.

Piegza’s and Goldberg’s comments should give us pause as we look into the New Year and beyond. It’s no secret that consumers hold the keys to the health of the economy, but if wages are indeed barely improving (and some argue they are moving backward overall for the average American family), this boom we are seeing now may be only short-lived, and the party hats and noise makers may get left in the drawers when we say goodbye to 2015 and ring in 2016.

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