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ON THE HORIZON


except Greece and Italy. That year, according to Congressional Budget Office numbers, Social Security, Medicare, Medicaid, defense, and interest on the debt could more than equal all federal revenues, with transportation getting $109 billion of the $1.09 trillion that would be spent by all other programs, all of it using red ink. According to Costello, the economic


recovery is slowing but appears to be sustainable. He said that the 2007-2009 recession was worse than the recessions in 1975 and 1982, but the country’s gross domestic product and unemployment rates are recovering more like the weaker 1991 and 2001 recessions. Manufacturing and retail sales are climbing after dropping during the recession. Housing starts fell from 2006-2009 and have been flat ever since. Unemployment bottomed out this year, but the private sector alone has increased payrolls every month this year for a total of 863,000 new jobs. Inflation has been low since 1984 and is not a near- term threat, but it is something to watch over time. Real GDP, which fell through most of 2008-2009, is rising with a long-run average of 3 percent going forward. Unemployment rates show a clear trend:


High-skilled workers are in demand, but low-skilled workers will have trouble finding good jobs. As of September 2010, 15.4 percent of Americans with no diploma were unemployed, while only 4.4 percent with bachelor’s degrees or higher were. During his remarks, Huether said that


high unemployment is contributing to lower consumer spending on services compared to past recoveries. The good news, Huether said, is that manufacturing is much higher than during those past recoveries thanks to higher-than-usual exports. That’s good for trucking, which is responsible for transporting those manufactured goods and the raw materials that are used to make them. Huether reminded his audience that even with the loss of manufacturing jobs overseas, the United States remains by far the world’s largest manufacturer. Krugman said luxury items, such as jewelry and computers, also are making a comeback. All modes of transportation are


undergoing a freight recession. The recession that lasted from 2007 to 2009 saw a 16.5 percent drop in billions of tons delivered – far worse than the 2.5 percent drop-off in 2001 and the 2.8 percent drop in 1991, and even worse than the 14.1 percent drop from 1980- 1982. But after falling in 2008 and 2009, for-hire tonnage was rising in 2010 as of


8 GOVERNMENT DEBT NOW EQUALS 60


PERCENT OF GROSS DOMESTIC PRODUCT, WHICH PUTS THE UNITED STATES IN A


SIGNIFICANTLY BETTER POSITION THAN THE UNITED KINGDOM, CANADA, PORTUGAL,


GERMANY, FRANCE, GREECE AND ITALY. BUT BY 2020, THE NATIONAL DEBTWILL EQUAL $20 TRILLION, OR 90 PERCENT OF GROSS DOMESTIC PRODUCT ANDWORSE THAN ALL OF THE ABOVE LISTED COUNTRIES EXCEPT GREECE AND ITALY.


September. The same was true for truckload loads, which were significantly higher in the first eight months of 2010 compared to the same period in 2009. Truckload and LTL average revenue per mile fell sharply from 2008-2009 but had been rising in 2010. The recession saw a historic drop in supply masked by an even more historic drop in demand, but both have moved toward equilibrium. Going forward, Costello predicts capacity


could get very tight. Overall truckload capacity has tightened enough that demand doesn’t need to grow very fast as long as fleets don’t add equipment. Carriers have reduced their fleet size, exporting a large number of used tractors in recent years, and while failures have been lower than expected, they are likely to increase. Class 8 truck sales fell from 284,000 in 2006 to 95,000 in 2009, with 2010 numbers not much higher. That means sales are below reasonable replacement rates, meaning trucking companies are getting rid of more used trucks than they are buying. Most fleets are not buying trucks until 2011, and the driver shortage is returning. Government regulations, such as CSA 2010 and EPA engine regulations, have further raised the barrier into entry, and nothing suggests an increase in industry supply any time soon. “We’ve never seen so much supply come


out of this industry, but as tough as it was, it’s now starting to pay dividends,” Costello said.


ROADWISE | ISSUE 5, 2010 | www.mttrucking.org Trucking employment began to fall as the


recession began in the fourth quarter of 2007 and continued to fall until leveling off in about the fourth quarter of 2009. Small truckload carriers were hit the hardest, but the job loss began leveling off in the second half of 2010, while large truckload carriers saw less damage and began leveling off at about the same time. LTL carriers continually lost jobs until the first part of this year. Specifically, jobs for local drivers for large and small truckload carriers saw large reductions, while other trucking jobs, such as sales forces, took smaller hits. One bright spot: turnover. Often around the 100 percent mark, it fell in 2006-2008 and as of the second quarter of 2010 stood at 49 percent for large truckload carriers and 46 percent for small truckload carriers. As for the long-run freight transportation


outlook, pounds of freight generated per gross domestic product have been reduced by 47 percent since 1970. But tonnage is expected to increase from 2009 to 2021 across all modes of transportation, with trucks continuing to carry the bulk of the nation’s freight. According to Costello, trucks were responsible for 68 percent of tonnage in 2009 and will be responsible for 70.7 percent in 2021. In other words, trucks will continue to bring it, in good times and bad. RW


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