The news from California was grim: On Monday, Gov. Gavin Newsom said he would pull back into the opening the state in full. He ordered restaurants, bars and movie theaters to close indoors as cases in the U.S. rise again, especially in the Southwest and South.
Economists and trucking consultants are reweighing the numbers, trying to figure out where the industry stands in terms of economic recovery and what would happen if another round of widespread layoffs and layoffs occurs. Although the death rate from COVID-19 is lower compared to the numbers in the US in April and May, the new cases could easily cause waves of problems in the country – including more deaths. More deaths and problems with hospital capacity could trigger the kind of sudden shutdowns the nation saw in the spring.
The news comes as many economists were already saying commodity volumes would decline for 2020 and suspect year-end economic numbers will be dismal. Now it is becoming clear: The coronavirus is still responsible for the fate of commodity numbers for the rest of the year. Even if freight shows continued recovery from virus-related disruptions, 2020 will likely be a big net loss.
“2020, by any measure, is not going to look good,” Rajeev Dhawan, director of the Center for Economic Forecasting in the College of Business at Georgia State University, told Transport Dive.
Is the worst over for trucks?
Dhawan said trucking depends heavily on what comes out of the ports — especially the nation’s two largest ports in Los Angeles and Long Beach — but the rest of the world is also fighting the virus and consumer demand for a lot goods remains low.
However, the transport sector hit an “artificial bottom” in May, he said. Various economic sectors have artificially recovered because they benefited from government spending and Fed actions. Now, as the year sinks into July, with no vaccine or stable therapeutic treatment, there is a realization that 2021 could also be cut short.
“We do not expect volume to recover to pre-crisis levels until the second half of the year [2021],” said Avery Vise, vice president of trucking for FTR, speaking in a webinar on key freight issues Thursday.
The worst may be over, Vise said, but there will be real damage to the final 2020 numbers. “It’s definitely going to be negative relative to 2019,” Vise said. “Our latest forecast is for a 5.7% decline in shipments this year.”
In terms of “active use” — trucks with drivers carrying goods — Vise expects growth later next year. Utilization was around 83% in May, compared to 98% in May 2018, during the boom in fares. Vise’s charts show that he and FTR expect active utilization to rise to around 88% in May 2021.
Vise said he has seen evidence of a gradual tightening in the trucking and freight economy overall. Some of the data shows that the national freight economy is making a comeback. But he cautioned that the recovery numbers are coming from low levels.
“If we look at what’s going on right now, though, we can’t ignore that the real-time activity indicators are pretty strong,” Vise told the webinar audience. “Two weeks ago, overall cargo availability on the Truckstop.com system was the highest it’s been in nearly two years. The same was true for dry truckloads. Refrigerated and flatloads weren’t as strong, but they were among the best. of the year and both were higher than both last year’s levels and the five-year average.”
“But if we look at what’s happening right now, we can’t ignore that the real-time activity indicators are pretty strong.”
Avery Viz
Vice President Trucking, FTR
But, as with many economists, he cautioned the public against hope.
“Just a few weeks of strong growth that we’ve seen is not enough to say that we’re on the verge of another, say, third quarter of 2017 or something like that,” Vise said.
Lessons from the distant and not-so-distant past
James Burg runs a fleet of 90 trucks in Warren, Michigan. James Burg Trucking primarily transports steel for manufacturers. Burg said his company was hit but benefited by learning lessons from the previous US economic disaster: the Great Recession of 2007 to 2009.
“We looked at the Great Depression as a benchmark,” Burg said of recession planning. “And we made sure we had the resources.”
Burg told Transport Dive that the shutdowns had an odd effect on demand for steel content: less demand for cars, but more demand for household items that might need replacing, such as washing machines, which were used more than normal.
Burg pointed to the Darwinian process the field went through. If fleets are still operating after the spring shutdown, they are likely prepared, financially and otherwise, for another round of regional shutdowns, he said.
Incidents versus fatalities
The health of the transport sector depends on internal debates within the epidemiologist community. Like the nation at large, FTR is having internal discussions about what affects the economy more: new cases of coronavirus infection or deaths from COVID-19, according to FTR CEO Eric Starks, who also spoke during the webinar. seminar.
As casualties dwindled, some administration officials, including President Donald Trump, said the worst was over and now was the time to reopen schools and most, if not all, businesses.
But about 67,000 cases are reported daily in the United States, based on a five-day average, according to Johns Hopkins, compared to the spring peak of 36,300 cases per day reported. The increase in positive cases has many nervous about the economy.
“We want to see [the fatality] number as low as possible,” Starks said. “But I don’t think he’s the one driving the economy. What pushes the economy the most is the number of new cases.”
Positive tests as a percentage of all tests were expected to stay the same, but they didn’t, Starks said. The positive test rate is above 10% in states like Florida, compared to single-digit rates earlier in the spring.
“What drives the economy the most is the number of new cases.”
Eric Starks
CEO and Chairman, FTR
Starks told the webinar audience that more testing is finding more cases, but the new cases also come with the same questions that were raised in the spring: Do we need to protect hospitals from overcapacity? Do we need to close again?
Another round of closures could create problems for the movement of goods. Starks said a new economic disruption could be different and therefore have an impact on the national economy. California has many manufacturers and food production. Texas has chemical manufacturers and fuel production. “That’s got a big chunk of GDP in there,” Starks said.
Some trucking executives loathe the idea of a new wave of shutdowns, resulting in less need to haul goods to schools, restaurants and bars.
“I can lose money for a long time, but I can’t not run” said Royal Jones, CEO of Mesilla Valley Transportation, speaking to Transport Dive in June. “He killed us in April and May.”
Not out of the woods
What has changed the outlook for 2020 are the newly observed aspects of the coronavirus, including its highly contagious nature.
“One thing we have learned is that opening without proper precautions is troublesome and that’s why we need both the therapeutic and the vaccine to open properly,” Dhawan said. “We will open, we will continue to work.”
But Dhawan said things will not return to normal on January 1, 2021. Ultimately, the economy and trucking are still in the grip of the coronavirus. Dhawan compared the virus to a forest fire that cannot be stopped.
“2020 depends on how the virus evolves. The timelines of the recovery — how strong, how even, how uneven — will be how this virus develops over the next six months.”
Rajeev Dhawan
Director of the Center for Economic Forecasting in the College of Business at Georgia State University
“2020 depends on how the virus evolves,” Dhawan said. “You have no control over it… The timelines of the recovery — how strong, how even, how uneven — will be how this virus develops over the next six months.”
Dhawan said businesses always face risk and uncertainty. But this time, officials can’t predict the end as the wildfire continues to burn its fuel, he said.
Burg said the current recession is “resetting” the economic clock, meaning the economy will likely enter a long-term growth spurt when things return to normal, Burg said with some optimism. Burg said he hopes the worst of the shutdowns is over.
“I will say this: The shutdowns were worse than the Great Depression,” Burg said.