Latest US jobs report bodes well for freight growth

Latest US jobs report bodes well for freight growth

With an increasing number of U.S. workers finding and keeping jobs, the positive momentum for freight transportation will likely carry forward.

The U.S. unemployment rate dropped to 5.9 percent in September, the lowest level since July 2008, according to the U.S. Department of Labor’s Bureau of Labor Statistics.

U.S. nonfarm payrolls advanced by 248,000 during the month of September, topping the median market consensus of 215,000, and were upwardly revised in August and July for a net gain of 69,000. In the last eight months, with the exception of August, nonfarm payrolls increased by more than 200,000 per month, which helped bring the national unemployment rate down to 5.9 percent – its lowest level in at least six years.

The fortunes of the freight transportation industry are inextricably linked to the ongoing recovery of the labor market. As the labor market continues to recover, not only personal income but also expectations about the near future improve, creating an atmosphere for higher consumer expenditures. For the first two months of the third quarter of this year, personal consumption expenditures on durable goods (adjusted for inflation) were up remarkably by 7.6 percent year-over-year, a slight improvement over the 6.9 percent growth seen in the second quarter.

This indicates that U.S. consumers are more confident of their economic prospects and are therefore willing to commit a higher share of their budgets to big-ticket items, which include such goods as household appliances and furniture, automobiles and home computers. As total consumption expenditures represent more than two-thirds of the U.S. economy, the steady recovery in the labor market bodes well for the near-term outlook of the freight transportation industry.

The recent job gains combined with the still prevailing low mortgage rates can give a needed boost to the ailing home sales market with positive implications over freight transportation. Existing home sales were down 5.0 percent year-to-date through August, while new home sales were up by only 2.4 percent over the same period of time. Partly due to the tight supply in the existing home sales market, homebuilders remained somewhat optimistic this year as evidenced not only by the recent housing starts figures, but also by the latest construction jobs numbers. In the last three months to September, the residential construction sector added 36,400 jobs, underlining an upward trend.

If housing starts stay on the uptrend then expect to see gains in the transportation of housing industry inputs such as logs and lumber, and tacks and nails, while improving new home sales will boost gains in the transportation of furniture, appliances, marble and granite, among other things. Asia is a major supplier of home goods to the U.S. For the first half of 2014, total U.S. ocean imports via container from the Far East Asia region were up 5 percent year-over-year, and are projected to close the year up 5.7 percent and total 13.8 million 20-foot equivalent units – a new peak after a long seven-year recovery.

While it is still early to say the U.S. labor market is out of the woods, overall employment looks more robust after the release of the September jobs report. As a result, the near-term outlook for the global freight transportation sector brightens.

Contact JOC Economist Mario O. Moreno at mmoreno@joc.com.