Industry Indicators: April 25-May 1
Industry Indicators: April 25 - May 1
iLevel Logistics presents intriguing data that offers a snapshot of notable industry changes and events during the week of April 25th through May 1st.
The PRO Act, Highway Trust Fund, Amazon, Warehouse Employment, Shipping Updates, Flatbed Demand, and Inflation Fears
Business Owners and the Protecting the Right to Organize (PRO) Act
Source: Alignable
“And that’s why I’m calling on Congress to pass the Protect the Right to Organize Act, the PRO Act, and send it to my desk to support the right to unionize.” Joe Biden, Joint address to Congress
Among other things, if the PRO Act becomes law, it will impose a stringent definition of independent contractor. This could deny individuals the ability to work independently, threaten the gig economy and devastate trucking companies that depend on owner operators (see Road Scholar’s post The ABCs of AB5). In short, companies that cannot afford to increase their full-time staff will shut down or cut substantially their independent contractor work force.
In a recent survey of small business owners, Alignable found that 45% of those polled indicated the PRO ACT would in fact put them out of business.
In addition, about three-quarters of small business owners noted that free-lance workers were important to surviving the COVID-19 pandemic.
Alignable also asked Independent Contractors what percentage of their business would disappear if the law changed, and they had to be hired as W-2 employee – instead of a contractor. A large majority thought they would lose most of their business.
Nearly 40% of contractors believed their work would disappear because companies would be unwilling to pay the higher expenses associated with W-2 employments.
Highway Trust Fund
Source: CBO
The Highway Trust Fund was established by Congress over 50 years ago to finance the surface transportation infrastructure.The solvency of the Highway Trust Fund is now in question.The Congressional Budget Office (CB) projected the balances in both the highway and mass transit accounts of the Fund will be exhausted in 2022.
Federal and state government spending on highways has been stable but relatively low the past 30 years.
In 2019, excise taxes on gasoline, diesel, and other motor fuels represented 82% of the Trust Fund revenues or about $36 billion. If these taxes are extended, as is, CBO projects about 1% decline in revenue over the next 10 years.
To remedy the revenue shortfall, several options are on the table including increasing existing taxes on gasoline and diesel, taxes on vehicle miles traveled, on freight movement, on electric vehicles, or additional transfers from the Treasury’s general fund.
Amazon grows and grows
Source: SupplyChainDigest
Right now, Amazon has 824 US logistic facilities. And, it plans on adding an additional 325 – a 40% increase!
Warehouse employment plateaus at high levels
Source: SupplyChainDive
Warehouse workers are in demand and have been for some time. After the widespread pandemic lockdowns last spring, warehouse employment surged from 1,237 in April 2020 to 1,434 in November. It now stands at 1,414.
Shipping up-dates
Sources: AJOT, FreightWaves, FreightWaves, AJOT
The number of container ships awaiting entry into ports LA-Long Beach eased this past week, declining from a high of nearly 40 ships in February to just under 20. The average wait is also down to 7.7 days, from 8 days two weeks ago.
However, analysts project significant challenges ahead. FreightWaves SONAR data that tracts ocean bookings to the U.S. – measured in TEUs on a 10-day moving average, reached a new record this past week. Nerijust Poskus, vice president of global ocean at freight forwarder Flexport, warned, “Buckle up. The month of May will be the worst people have ever seen.”
The unprecedented demand for durable goods from China has led maritime operators to ignore U.S. exporters and rush containers back to Asia. Many of those containers are now empty. For the first time, total inbound rail container volume heading into Los Angeles shows that empty containers (red) surpassed loaded ones (blue). Perversely, it’s more efficient to move the empty containers back to the ports and then off to China to exploit the current rates.
The next graph illustrates those lucrative rates. Spot rates from China to the West Coast are near record highs.
Finally, with vessels stacked high with containers, and significant pressure to deliver goods as quickly as possible, an increasing number of containers fall overboard. In 2019, over 3,000 containers dropped into the ocean and over 1,000 this year have already been lost at sea.
Housing spurs demand for flatbed
Source: TransportDive
As the weather warms across the nation, average home listing prices continue their upward trajectory – March’s average was a record at $370,000. And expect the pattern to hold with low inventory, attractive mortgage rates, and a fading pandemic.
With these prices, builders are on the move. Housing starts increased 19.4% month over month to 1.7 million in March. It’s the best figure since June 2006.
The housing market activity translates into higher demand for flatbeds. DAT’s flatbed load-to-truck ratio reached its highest point since mid-2018. In March, there were approximately 83 flatbed loads for every truck available – the ratio for the week ending April 18 was approximately 96!
However, as various sectors of the economy heat up – including housing, driver availability in March hit a new low.
Inflation fears
Commenting on the Federal Reserve’s new but increasingly controversial approach to inflation, Larry Summers Treasury secretary under President Obama noted the Fed’s traditional approach to inflation has been to
“take the punch bowl before the party gets out of hand. And what we’ve now said is, we’re not going to do anything until we see a bunch of drunk people staggering around. It seems to me we are taking an enormous risk.”
Several recent releases of inflation indices point in the same direction. iLevel wonders how long the Fed will take before it acts.
First, Manufacturing ISM Prices Index: this index reflects industry prices for raw materials. The March report shows the highest figure in more than five years.
Second, a regional look at prices received by manufacturers – New York, Kansas City, and Dallas Fed district prices all climbed to record highs in April. Business executives report the cost of inputs this year will rise more than twice as fast as 2020.
Third, crop prices soar to 8 year high.
Fourth, since June 2020, consumer price index month-to-month changes are steadily rising. March increased .6% over February.
Finally, University of Michigan’s Inflation Expectation measure reached its highest point in over 5 years.
And that’s it for this week. Thanks for reading!
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