Thank you for reading the November edition of the Monthly Truckload Market Update. This is a monthly subscription, published within the first 10 business days of each month, so be sure to subscribe to receive future editions. This newsletter reports on macroeconomic data that directly impacts freight markets, and reviews full truckload rates each month.
Good morning America. Last night was a historic night for the United States with amazing turnouts to vote across our nation. As I am putting the final touches on this update at 5am 11/6 it appears a winner is already evident. Last month, in the October update I covered both presidential candidates' proposed tax/tariff policies and their potential implications on corporations and US GDP growth. You are welcome to revisit that. In the coming months as more details emerge around any effects policy changes will have relative to US economics and freight markets I will be covering them, so be sure to watch for future editions.
I think my main area of focus for this month is on this graph provided by Edward Jones, so let's break this down.
Most of Q3 earnings are in, and we now have much firmer predictions for how 2024 will end up. Clearly YOY growth in 2023 did not support a robust freight market and we all felt that. In 2024 we have had little recovery again as most of the activity we have seen in earnings is coming from tech and service related sectors. Growth in those sectors was paired with weakening demand in freight generating sectors like manufacturing. Jason Miller often talks about the freight generating sectors of the economy, and for this Newsletter he plotted out several examples of industries that experienced a soft year for growth that contributed to the sustained low freight market all through 2024.
Even though ISM’s PMI has shown some improvement since late summer, we still remain consistently below the 50 expansion level. Consequently, we aren't seeing evidence of manufacturing new orders rebounding just yet.
"Data that was recently released on inflation adjusted capital investment in residential structures (single family & multifamily) as well as improvements shows that housing activity, while 10% above 2017 levels, was down slightly on a seasonally adjusted basis this year from Q1, which helps explain why we didn't see the type of freight market recovery we were expecting in 2024."
"Staying with the capital investment narrative but focusing on oil well drilling, we are flat from last year and down ~12% from the most recent peak levels in late 2022/early 2023."
Warehousing construction continued its steep fall in Q3, down now 20% year-over-year.
Now, back to what Edward Jones predicted for 2025. If the growth prediction was based on more big tech and AI expansion, we would not have reason to be that excited. But, thankfully I did not have to dig too deep because they broke down their predictions:
Industrials, Materials, some S&P 500, consumer discretionary, utilities, energy, consumer staples, these can all help drive freight volumes. While tech and healthcare will continue to lead, we have other sectors making worthwhile gains in the 2025 predictions.
I’m seeing increasingly more positive predictions on the direction of the US economy in 2025, which is refreshing. The reality is, as long as we see improvements in freight generating sectors we should be poised for a better year for freight markets than this year.
Another big part of moving in a more positive direction that I have been closely following over the last couple of years is inflation and interest rates. All signs right now point to further rate cuts coming in the next Fed meeting. Rate cuts and inflation remaining close to target will help to progress the narrative of a stable 2025 economy and the potential for a rebounding freight market. Jobs data is one of the most impactful data points right now impacting Fed decision making. The most recent JOLTS report should give the Fed every reason to support cuts.
You may have heard about the recent jobs report, as at first glance it was especially abysmal. However, I think the reality is we don’t know a lot of what we don’t know right now. The hurricanes had a significant impact on this data, and there will likely be plenty of revisions coming, but what is important is that unemployment remained steady at 4.1%.
Gad Levanon the Chief Economist at The Burning Glass Institute said:
“Finally, when analyzing JOLTS (Job Openings and Labor Turnover Survey) data, it is important to proceed carefully due to its complexity. The dataset includes multiple measures, such as job openings, hires, quits, and the openings-to-hires ratio. Each metric has both a level and a growth rate, and each reflects a combination of factors, including economic growth, job growth, labor market tightness, and, crucially, labor market churn. Admittedly, I find the current signals from JOLTS challenging to interpret comprehensively. However, what is clear is that the earlier view suggesting that deterioration in JOLTS data signaled a decline in economic growth or an impending recession has been proven incorrect. The relationship between these measures and broader economic trends is more nuanced than previously assumed, and it requires a deeper understanding to draw meaningful conclusions.”
Mark Hamrick from Bankrate wrote
As expected, the October employment report was, in a sense, another casualty of recent hurricanes and flooding because of the statistical noise feeding into the weak payrolls gain of just 12k. This is from the so-called establishment survey conducted in mid-October. Perhaps more meaningful: Downward revisions in payrolls for August and September cutting them by 112k jobs. Relatively unaffected and created by the separate household survey, the unemployment rate holds steady at 4.1%. The Federal Reserve looks at all of this and will also look past the noise, expected to cut interest rates at the upcoming meeting. We'll have more coverage on that at Bankrate
Guy Berger, Ph.D. , also from The Burning Glass Institute said:
This was a very messy jobs report, impacted by the hurricanes and Boeing strike. We didn't learn much about the health of the labor market (as of mid-October) today, and will probably need to wait until next month's report for a clean signal.
Anyways, all that to say that we don’t need to put too much weight in this data yet other than that it supports federal rate cuts at this time.
I think we are all a little too skeptical and apprehensive to want to fully lean into such a positive 2025 prediction, especially when we hear of credit card debt rising. I believe I have covered this well in the past so I will just mention it, but wage growth has been steady and kept pace with inflationary pressures. However, something I know I have heard a lot about in recent years, and something I have covered in this newsletter, is the personal savings rate. This got a lot of attention as inflation got out of control, economists were looking at the rapidly decreasing personal savings rate as an early alarm that consumers were not going to be able to sustain spending power as they depleted their finances. It was a convincing narrative.
I want to circle back, because meaningful revisions have been made to this data. Matthew Klein has been covering this extensively over at the Overshoot and he shared this a couple of weeks ago:
His provided commentary said:
The headline personal saving rate was revised up, but as regular readers know, this number has long been misleading given the outsize potential for share buybacks and capital gains taxes to distort the picture. An alternative measure I constructed that tried to exclude those factors was revised up much less, although it had also dropped much less than the headline number. Either way, the flow data suggest that consumers are not under any pressure to cut their spending.
To go on to further summarize his findings he said that while average household incomes have gone up significantly since the 2010s, the average savings rate has remained almost unchanged. In other words, people are making more but not saving more. Many worried they are using it to pay off debt and cannot afford to spend in other areas (and no doubt many may be, especially student loans) but this graph really surprised and impressed me. Even with rising credit card debts and delinquencies, when we really zoom out and look at the debt picture holistically we are in a better position now than we have been in quite some time:
To wrap this up, I think we have reason to be optimistic for 2025, but I also think we need to be careful about assuming inflation is conquered as we try to balance rate cuts. I am also interested to see what new policies will come into play in 2025 as a new president takes office.
Another month of not so great news here. While YOY rates have inverted and the next cycle has begun we find ourselves in a very slowwww march back in a positive direction. And with contract rates typically showing 6 month lags we may be well into Q2 before any meaningful changes occur in the contract space. We will need to see the gap between spot and contract start to narrow, although that progress will likely lose some momentum in what is historically the slowest time of the year for freight in early Q1.
Reefer rates are moving horizontally:
Dry van showed a small uptick on the heels of a small decline:
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