Are trucking and truck manufacturing companies losing their appetite for employees? In a single week in October, UPS and Freightliner both announced layoffs. Meanwhile, more acquisitions than ever are filling the business pages of trucking publications. Every one of those deals carries the likelihood that duplicate jobs will be eliminated.
Such reductions are prudent in light of two developments. First, economic growth has slowed dramatically. Real GDP, which is the broadest measure demand for trucking services, rose at a seasonally adjusted annual rate of 2.6% in the second quarter of 2006. That was less than half of the 5.6% growth rate for real GDP in the first quarter.
Second, truck manufacturers would be paring jobs soon even if GDP growth hadn't slowed. They have long expected a tumble in truck orders in early 2007, following a rash of “pre-buying” in 2005 and 2006 as customers rushed to beat the 2007 engine and emissions requirements.
The strongest evidence that trucking employees are in less demand than they were a year or so ago comes from the October report of the Bureau of Labor Statistics (BLS), which indicated that the number of employees on trucking company payrolls had increased 2.3% between September 2005 and September 2006. Although similar to the year-over-year changes recorded each month since January, it was down sharply from the 3-3.5% growth reported in most months of 2005.
The slowdown in employment growth is even more noticeable in some subsectors. For instance, long-distance general freight truckload employment jumped 6% from the second quarter of 2004 to the spring of 2005. One year later, the growth rate had dropped by three-quarters, to 1.5%. The latest reading, covering August 2005 to August 2006, showed growth of just 1.3%.
It's possible that part of the slowdown reflects a switch from employees to owner-operators, but there is no evidence for that. Data on self-employment are published with a much longer lag than are figures on payroll employment. But recent high diesel prices are widely considered to have discouraged, not encouraged, owner-operators.
The downshift in heavy-truck manufacturing is even more dramatic. That industry was adding employees at a 12% clip from the spring of 2004 to the same period of 2005. By this spring, payrolls were more than 3% smaller than the previous year, and employment in August 2006 was down 6.8% from August 2005.
Proof that the truck-manufacturing downturn is a function of the end of pre-buying comes from looking at trailer manufacturing. That industry has recorded year-over-year employment growth rates of anywhere from 6 to 12% since mid-2004 and has shown no letup recently.
The bottom line: The recent slackening in employment growth for trucking and truck manufacturing does not mean hard times are suddenly hitting the industry. In fact, the 2.3% rate of job growth for trucking in the latest 12 months is nearly double the growth rate for overall payroll employment. But carriers should have a little easier time filling vacancies in the next year, particularly if they go prospecting in areas where there have been recent mergers or layoffs.
Nevertheless, the slowdown is likely to persist for several more quarters. Home construction, remodeling, and sales have not hit bottom. As those activities contract, they will drag down demand for many types of trucking. The less hectic trucking demand will mean fewer orders for new trucks, compounding the steep drop already under way in heavy-truck manufacturing employment.