Coronavirus
One of the chief developments for COVID-19 is that the city of Shanghai, China, is officially out of lockdowns. This has promoted significant activity within the city and the Port of Shanghai as the port begins operations as well. At this time, city activity, including manufacturing and transportation is at 80% of its pre-lockdown levels, and the Port of Shanghai is at approximately 95% of its former output. Delays are currently being reduced now from a 69-hour waiting period to a 31-hour waiting period.
GDP
The US economy is once again signaling decline with low inventories and business investments being the main drags. Some of the worst affected are general merchandise stores and higher end merchandisers like car dealerships. Other significant declines include residential investment (-14%), structures (-11%), and equipment (-2%).
Employment
The unemployment rate has held steady for most of 2022 at 3.6%. In June, the number of unemployed persons fell 38,000 to 5.192 million, but the employment level also decreased 315,000 to 158 million. This has shifted the labor participation rate from 62.3% to 62.2%.
Inflation
Inflation rates continue to climb as they have for most of 2022. June saw the greatest spike at 9.1% and is the highest rate seen since November of 1981. This is .5% climb from May 2022. The highest industry sector affected is energy (+41.6% – the most since April 1980). Within the energy industry the highest increases came from fuel oil (+98.5%), gasoline (+59.9%), and electricity (+13.7%). Other significant increases came from food (10.4%) and shelter (5.6%).
Manufacturing
The manufacturing rate is once again in decline. In June, the PMI for manufacturing fell to 52.7 from 57 in May. Mostly this is attributed to weaker demand conditions, hiring challenges, and raw material shortages.
Interest Rates
June saw the highest interest rate hike since 1994 at a whopping .75% – making the target range for federal funds 1.75%. This is the third consecutive rate hike this summer. The Fed is messaging that it will continue to create a steeper path of hikes than it had previously forecast in March in order to curb inflation rates.
Capacity
The truck supply outpaced demand this June as fewer companies posted available loads on boards like DAT. The June truck post rate grew 7% while the load post rate fell 20.2%. This also reflects an 11.2% uptick in capacity over June 2021.
Regulations
June produced little trucking legislation and was actually marked by lack of judicial action from the US Supreme Court. The court refused to hear a lawsuit from the California Trucking Association against California law Assembly Bill 5, dubbed AB5.
AB5 is legislation that established and confirmed a three-pronged test for workers to be considered employees rather than independent contractors in California. The three prongs of the test state that an independent contractor is:
1 – A worker that is free to perform services without the control or direction of the company.
2 – A worker that is performing work tasks that outside of the usual course of the company’s business activities.
3 – A worker that is customarily engaged in an independently established trade occupation, or business of the same nature, as that involved in the work performed.
While the law was designed to target the gig economy market, it has affected California’s trucking industry. The law effectively converts nearly 70,000 independent truck drivers into employees – a move which is both beneficial and disastrous for the trucking market. It is beneficial for drivers in need of health insurance and other employment benefits. California employers are mandated to offer employees these benefits as part of their working conditions. However, the costs associated with those benefits will find more companies downsizing their workforce or going out of business altogether. Both of which put even greater strain on the limited driving workforce in California.
The California Trucking Association and others sued the state to reverse the law but was rejected to the 9th Circuit Court. From there, the US Supreme Court has declined to hear the case.
Technology
One of the newest technology influences in June is Google’s entrance in the Last Mile Space. Using their mapping application, Maps, Google has branched out into two new last mile apps – Last Mile Fleet Solution and Cloud Fleet Routing API. Mapping has traditionally been one of the most difficult components of last mile delivery for shipments like parcel, so utilizing a sophisticated, established platform, like Maps, seems like a natural extension. Jim Nicholson, Senior VP of Operations at Loadsmart, commented on the new apps emergence by saying “Having a leading web mapping platform absolutely gives them a great opportunity and some advantages against their competitors.”
Fuel Impact
Fuel prices declined in June by 4.7% but are still a staggering 64.3% higher than June of 2021.
