What to take away from the logistics industry this December
Remote work here to stay
The effects of the pandemic are slowly disappearing. As of November 2022, hotel occupancy, sports attendance, restaurant dining, and air travel are all nearly the same as 2019 pre-pandemic levels. However, office occupancy is still less than half of what it was pre-pandemic. Remote work showed workers and management that formal office space is not necessary.
Only time will tell. But remote work appears to be a permanent feature of the employment landscape.
Job quits remain elevated due to the favorable job market
Though many businesses are returning to pre-pandemic levels, the Great Resignation continues. This past year produced an unusually high rate of job quits and job openings, but a low number of job layoffs. A large part of the high rate of job quitting is a tight job market. Workers are exploiting a sellers’ market and quitting to take new, more lucrative jobs.
Falling demand eases pressure on global supply chains
Pressure on supply chains eased up substantially this year. This is due, in part, to slowing demand, which produced many of the supply chain headaches in 2021. The Federal Reserve Bank of New York’s Global Supply Chain Pressure Index (featured below) did tick back up slightly in October and November – due to slower delivery times in China (likely caused by persistent, widespread, COVID lockdowns).
Trade from China to the U.S. slows significantly
After reaching record levels during the pandemic lockdowns, vessel TEU (20-ft equivalent unit) volume from China to the United States has dropped significantly since the end of summer 2022. Falling demand, as noted in the previous graph, is largely responsible. U.S. manufacturing orders in China are down 40% and analysts expect additional erosion in the months ahead.
The logistics industry slowing down after pandemic records
The Logistics Managers Index (LMI) continues to slide as economic activity slows for the second month in November. This extends the slow and steady decline from pandemic record highs in mid-2020. The LMI measures economic activity in the logistics industry by surveying logistic managers monthly. A reading greater than 50 suggests growth, and a reading below 50 indicates shrinkage. The LMI produced a record low in April 2020 but then increased considerably as pandemic-induced consumer demand soared.
Container ship lines disappearing
With consumer demand dropping, the daily lines of container ships waiting off at LA and Long Beach ports are disappearing. There is perhaps a no better example of demand contraction than the number of container ships waiting for a berth on the West Coast.
Slowing down inflation
Given the economic slowdowns noted above, it is not surprising that inflation declined in November to 7.1% YOY. The Fed’s aggressive rate increases appear to be working. Prices are declining, demand is falling, and supply chain pressures are easing.
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