Trucking forecast: bullish short term, bearish mid-decade
October 24, 2012
Trucking will see very solid growth next year as U.S. manufacturing improves but faces a tightening capacity situation because of tougher regulations that could hinder the industry’s ability to hire enough qualified drivers.
That’s the word from Noel Perry, economist from FTR Associates, a respected and long-time trucking forecaster who is forecasting a decent 2013 but warned of a good chance of recession in mid-decade.
“Most economists don’t forecast recessions,” Perry said last month at annual meeting of the North American Transportation Employee Relations Association (NATERA). “But I do. I’m weird.”
While Perry is predicting just a 2.5 percent growth in Gross Domestic Product (GDP) for 2013, trucking volumes could rise as much as 5 percent next year. That’s because of an improving climate for U.S. manufacturing, among other factors, according to Perry.
“We are at the tail end of a period of relative stability in the economy,” Perry said. “Not much has happened in trucking in the last 18 months.”
He said supply is roughly in line with trucking demand, but warned there are changes ahead in the next three to four years.
“There is a new wave of regulation that will change a minor driver shortage into a major driver shortage,” Perry said, alluding to the government’s Compliance, Safety and Accountability (CSA) program that is estimated to eliminate as many as 150,000 driver jobs in the next five years.
The current overall anemic economic recovery has actually been quite solid for trucking because of the improving conditions in manufacturing, including the booming U.S. auto sector.
But Perry is somewhat bearish on the overall economy because of declining orders for non-defense capital goods orders. He said there is a good chance of recession in late 2013 or early 2014. He said the U.S. might take a decade to completely recover from the downturn of 2008-09.
“The last time this happened to the U.S. economy was 1930,” Perry said. “The economy recovered quite quickly from the depression. But the jobs situation did not improve until 1940.”
“We are getting more creative in getting along with fewer jobs,” Perry said. “It takes 10 years for the economy to create a whole new class of jobs. Our kids know about those jobs, but we (mature Americans) do not.”
But long-term, Perry is not very bullish.
“The U.S. economy will have a gun to its head by mid-decade,” Perry said, noting that large chunks of the economy cannot be cut—interest on debut, Social Security, Medicare, other entitlements and defense.
“We won’t start electing people who make hard choices until we absolutely have to,” he said. “That’s one of the reasons I’m pessimistic about 2014, 2015 and 2016.”
Perry told the trucking officials to “dust off your recession plans” over the next year few years.
On the positive side, Perry declared the “energy crisis is over” because of the newfound glut in domestic sources including natural gas. He said that fuel prices will likely drop about 50 cents in the next year, perhaps more during his forecast recession.
Because of changing demographics, the continued driver shortage will only worsen. He called driving recruiting the No.1 issue for trucking—“and it’s only going to get worse,” Perry said.
“Every trucking company should ask itself, ‘How do we become world class in recruiting truck drivers?’” Perry said. Hiring capacity is lower now than in 2009, he said.
“How do we go from hiring 200 people one year and 2,000 the next?” Perry said. “That is the No. 1 problem for trucking right now.”
Exacerbating the problem is an aggressive regulatory truck safety agenda in Washington. He said driver supply will worsen in the wake of CSA, tighter hours of service, electronic on-board recorders, tougher drug and alcohol testing and aging demographics.
“Not only is the economy putting stress on your hiring ability,” Perry told the trucking gathering. “But the government is too.”
Short term, that means for shippers that capacity will remain tight—at least in the next year or two. Because of tighter regulations, Perry is forecasting that the driver shortage could hit as many as 300,000 in the next few years.
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