While “no one knows what the new administration will mean for the economy and growth,” the Federal Reserve Bank of Chicago is sticking with its pre-presidential-election view that the economy will grow a bit better in 2017, though that growth won’t be substantial.
“We haven’t altered our forecast materially, but we do see an upside risk in economic growth,” said Chicago Fed sr. economist and economic advisor Bill Strauss. “There’s a better chance of it being stronger than of it being weaker.”
Gross domestic production expanded 1.7% last year, which makes the current run of economic growth the third longest in U.S. history, Strauss said at a presentation during the Heavy-Duty Aftermarket Dialog, an annual conference in Las Vegas for truck parts and service providers. With the Fed forecasting continued slow but steady GDP growth just under or over 2% for the next three years, we could be headed for the longest economic expansion in history, he said.
With 2.16 million new jobs created in 2016 and unemployment at 4.7%, employment growth has been relatively strong, but that hasn’t translated into wage growth, at least not yet, according to Strauss. He pointed to slow productivity growth as the brake on wages, which he attributed to weak business investment. “With labor relatively inexpensive and the economy only growing moderately, business is hesitant to invest in capital equipment to improve productivity. It’s safer to higher more who can be shed more easily if there’s a downturn.”
“But I think we’re in the 8th or 9th inning of getting the labor market back to where it should be,” he said. “I think we’re going to see more action in wages and qualified workers becoming more expensive.
Drilling down from that broad view to specific impacts for trucking, economist Bob Dieli of RDLB, Inc. forecast that economic activity directly related to trucking will grow in tandem with the GDP. Trucking employment, which Dieli also sees as correlating closely to the industry overall performance, is once again “increasing strongly” after a decline last summer.
While employment levels in the general freight long-haul truckload segment have not yet returned to pre-recession levels, they are on an upward trend, and LTL carriers in long-haul general freight have far exceeded their pre-recession employment levels, he said.
However, Dieli advised that the upcoming mandate for electronic logging devices (ELDs) “will materially impact how, where, and why freight moves by truck. … ELD regulation will bring structural change” to the industry.