Trucking employment in the U.S. slipped in September despite overall non-farm job growth moving higher for the 72nd straight month, according to a new Labor Department report. But other reports indicate manufacturing in the country is regaining some steam, fueling speculation over an interest rate hike.
For-hire trucking lost 3,600 jobs following an upwardly revised gain of 4,000 in August, while the wider transportation and warehousing sector saw a loss of 9,000 jobs last month. This follows job losses in March through June.
Overall, the economy added 156,000 jobs in September, fewer than many analysts were expecting and the smallest number since May. The six-month average slowed from 174,000 to 169,000, the weakest since November 2012.
Despite the September increase, the nation’s unemployment rate moved higher by a tenth of a point from August to 5% in September as the overall pool of available workers increased.
As labor markets move closer to full employment, the availability of workers will increasingly limit the monthly increase in hiring, according to Paul Ferley, assistant chief economist at Royal Bank of Canada Economics.
“The rise in the unemployment rate might argue against this tightening – though, given that it resulted from a surge in the labor force, it suggests increasing optimism among those currently unemployed to find work," he said. “The steady rise in wage growth also points to strengthening labor markets.”
Assuming continued stability in financial markets, Ferley said tightening labor markets would argue in favor of the Federal Reserve’s Open Market Committee hiking interest rates again soon. RBC believes that is more likely to happen next year, “as the central bank awaits greater confirmation that this labor market strength is fueling above-average, and sustained, gross domestic product growth.”
Others have a slightly different perspective, noting continued improvement in the labor market was at the forefront of the Fed’s latest talking points, suggesting the possibility of a year-end rate hike. Analyst Diane Swonk, speaking earlier this week at the American Trucking Associations' Management Conference & Exhibition, said she expects an increase at the end of the year.
The central bank committee has two more meetings scheduled for this year, in early November and mid-December.
Manufacturing and more
The jobs report followed other important economic news from earlier in the week, including a Commerce Department report showing new orders for manufactured goods rose 0.2% in August. That marks the second straight monthly hike after two consecutive months of weakness. The level of such shipments was nearly unchanged, but is up five out of the last six months.
Despite these gains, new orders and shipments are down 2.6% and 2.7%, respectively, from the same time a year earlier, which has likely resulted in part of the decline seen in truck freight levels and consequently pricing.
On a more upbeat note, a proxy of business investment, orders for new nondefense capital goods minus aircraft, increased 0.9% in August. Analysts hope this is a sign that businesses are beginning to spend again to expand and modernize their facilities, according to AP.
It reports one of the strongest categories in August was oil field and mining equipment, which climbed 6.1% after surging 48.4% in July and 223% in June. The sector has been struggling as energy companies cut exploration and drilling in response to the steep decline in oil prices over the past two years, resulting in some big negative effects for some trucking companies involved in the energy sector.
Oil prices moved past the $50 per barrel mark in the first week of October for the first time since June (although Hurricane Matthew could have something to do with that), as the U.S. oil rig count also moved higher for the 14th out of the past 15 weeks.
Meantime, two other reports on manufacturing also showed growth in the sector, though one indicated the level was slightly lower in September than it was in August.
The seasonally adjusted final IHS Markit U.S. Manufacturing Purchasing Managers’ Index registered 51.5 in September, down slightly from 52 in August, signaling the weakest improvement in overall business conditions since June.
Slower rates of output and new order growth were the main factors weighing on the headline index, which more than offset a stronger contribution from the staff hiring component.
However, a similar but more closely watched survey of the nation’s purchasing managers by the Institute for Supply Management showed not only an increase last month, but also a return of growth following a one-month reduction in August. Its Purchasing Managers Index registered 51.5%, an increase of 2.1 percentage points from the August reading of 49.4%, beating many analysts’ expectations.
In both reports, a number above 50 indicates manufacturing is expanding while below 50 signals contraction.
The ISM New Orders Index registered 55.1%, an increase of 6 percentage points from the August reading. The Production Index registered 52.8, 3.2 percentage points higher the month before.
The Employment Index registered 49.7%, an increase of 1.4 percentage points from the August reading of 48.3%. Nine of the 18 industries reported an increase in new orders in September, up from six in August. Ten of the 18 industries reported an increase in production in September, up from eight in August.
Since peaking in mid-2014, U.S. manufacturing has continued to struggle to gain momentum. After months of contraction late last year, month-to-month volatility has increased more recently, with a slight upward bias pushing activity back near-breakeven levels, according to Lindsey Piegza, chief economist at Stifel Fixed Income.
“[The] improvement is a welcome step in the right direction; however, continued minimal growth, both domestic and international, will most likely limit domestic production from contributing much, if anything, to second-half [of the year] growth,” she said. “Nevertheless, a better-than-expected report, even one month, helps alleviate fears of economic contraction and furthermore, bolsters the argument for the Fed to raise [interest rates] sooner than later.”
Commenting on the IHS Markit PMI report, Chris Williamson, chief business economist there, said the economy is stuck in a soft patch amid widespread uncertainty in the lead up to the presidential election.
“The survey saw firms pulling back on expanding production and focusing instead on cost-cutting, as inflows of new business slowed to the weakest seen so far this year,” he said. “Any growth is largely being driven by the consumer, in turn helped by tail-winds of low interest rates, low inflation and a solid labor market.”
If all of these reports leave you feeling uncertain, to say the least, you are not alone. Just a few days earlier during the American Trucking Associations annual Management Conference & Exhibtion in Las Vegas, economist Diane Swonk said there is a lot of uncertainty about where the economy is headed. The good news is there is reason for hope that it and business conditions for trucking are slowing improving.