Market Overview

Trucking Hires Continue To Stall As Job Growth Cools In The Economy

Trucking Hires Continue To Stall As Job Growth Cools In The Economy

Trucking hires continue to stall as job growth cools in the economy

Job growth fell well short of expectations in May as the economy added just 75,000 workers to payrolls during the month. Within the transportation and logistics sector, job growth also struggled as trucking hires continue to stall in the 2nd quarter.

The Bureau of Labor Statistics (BLS) reported that the economy added 75,000 workers to payrolls in May. This fell short of consensus estimates of a 180,000 job gain and is a marked slowdown from the strong pace of hiring in the previous month. In addition, results from both April and March were revised down by a combined 75,000 jobs, indicating that trends in hiring have not been quite as strong as previously thought.

Downward revisions to previous months and May's disappointing growth weaken the outlook for the labor market

Hiring during the month was weighed down by a 7,600 decline in retail employment, as the sector has been hit with decelerating consumer spending at the start of 2019. In addition, government employment fell by the largest amount in over a year, led by declines in state and local education jobs.

Despite the weak pace of hiring, the unemployment rate held constant at a near 50-year low of 3.6 percent in May. Wage growth also fell slightly below expectations in this month's report, as average hourly earnings climbed by just 0.2 percent from April's levels. As a result, year-over-year growth in wages slipped to 3.1 percent in May, down from 3.2 percent in the previous month.

Transportation and logistics hiring rebounds, but employment within trucking declines

The weakness in hiring in the overall economy spilled over into the transportation and logistics sector, which shed 700 jobs during the month. Most of this decline was driven by ground passenger and sightseeing transportation, however, which lost 4,600 jobs in May. Freight transportation and warehousing managed to eke out a slight positive gain in payrolls during the month, though continued declines in rail transportation employment weighed down overall results.

Job growth continued to stall in the trucking industry, which added just 300 workers to payrolls in May. The trucking industry added an impressive 44,000 jobs in 2018, as rising demand and surging rates helped propel hiring throughout the year. Some of this momentum carried over into January 2019, which saw an impressive 4,400 jobs added to start the year. Since then, hiring has stalled within trucking, as only 400 new jobs have been added from February to May combined. With conditions on the goods side of the economy performing far worse than the overall economy, it is unlikely that hiring within trucking will re-accelerate any time soon.

Trucking employment has stalled since the start of the year

Behind the numbers

The May job results were interesting at least in part because they give some insight into how the economy is behaving in the current environment of rising trade tensions. The reference period for the BLS' May survey occurred in the immediate aftermath of the U.S. reversing course on talks with China and deciding to increase tariffs to 25 percent. As such, any initial impact from the shock of trade policy likely played a role in the numbers here.

What is less clear is how persistent this impact will be. If hiring stays subdued, it will raise some significant concerns about the state of the overall economy and will likely prompt the Federal Reserve to cut interest rates to get the economy going again. For now, most of the other employment-related indicators look positive, which would suggest that May's results are just a temporary fluctuation. However, with the Trump administration injecting more uncertainty into the environment by announcing new tariffs on Mexico, there are some real questions as to whether the pace of hiring will stay slow going forward.

On the trucking side, the results in May continue a general trend that has emerged in the industry. We have often noted that historically, hiring trends lag behind demand. The BLS monthly figures are not a pure representation of the number of drivers in the industry, but much of the increase in hiring throughout 2018 was likely driven by carriers stepping up efforts to find drivers to respond to the surge in demand that began in late-2017. Now that demand growth has cooled and trucking rates have come down, employment in trucking is likely to remain flat or decline in upcoming months, either through layoffs or through carriers exiting the industry.

Ibrahiim Bayaan is FreightWaves' Chief Economist. He writes regularly on all aspects of the economy and provides context with original research and analytics on freight market trends. Never miss his commentary bysubscribing.

Image Sourced by Pixabay

Posted-In: Freight Freightwaves Jobs Report Logistics Supply ChainNews Markets General


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