An uptick in economic numbers measuring the flow of goods at the end of 2010, along with improved employment figures, is further improving the outlook for freight volumes at the top of 2011. The Ceridian-UCLA Pulse of Commerce Index (PCI ) surged 2.4% in December and combined with November’s 0.4% increase, helped offset three previous consecutive months of decline.
On a year-over-year basis, the PCI increased 4.1%in December, in line with the November and October year-over-year comparisons. Importantly, growth in December came on top of a very strong year-ago performance whereas the previous eleven months of year-over-year growth in 2010 were up against relatively weak prior year comparisons, explained Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast.
“It should be noted, however, that the 4.1% growth figure is only slightly higher than the 3% growth characteristic of a normal economy,” he added. “[Though] the latest PCI data further evidences the positive economic sentiment felt since the start of the New Year, we have not entirely escaped the summer doldrums as the three-month moving average is still below its July 2010 level.”
Much of the December PCI increase is attributable to the week between Christmas and New Year’s having been stronger than usual. Even though December overall was 3% below the previous December peak month in 2007, diesel fuel purchases in the inter-holiday week exceeded 2007 levels.
“This is partly a consequence of Christmas and New Year’s falling on weekends, but also likely reflects inventory replenishment driven by a combination of consumption and restocking as the country’s mood elevated regarding growth in 2011,” said Craig Manson, senior vp and index expert for Ceridian, which provides the diesel fuel purchase data the UCLA Anderson Forecast uses to assemble its PCI.
Still, the improvement in the PCI is occurring alongside rising employment in the U.S. – a key metric for freight growth, according to H. Peter Nesvold, managing director for equity research at Jeffries & Co. Inc.
“It’s not the absolute level of unemployment that’s important; that has little bearing on freight,” Nesvold told Fleet Owner. “It’s changes in the unemployment figures that matter far more."
From that standpoint, then, positive trends continue to build for freight as private-sector employment increased by 297,000 from November to December last year on a seasonally adjusted basis. That’s, according to the latest ADP National Employment Report, issued by Automatic Data Processing, Inc. (ADP), in partnership with consulting firm Macroeconomic Advisers, LLC.
Derived from actual payroll data, it measures the change in total nonfarm private employment each month. ADP’s latest report indicated employment in the service-providing sector rose by 270,000 in December alone – the eleventh consecutive monthly gain and the largest monthly increase in the history of the report.
Employment in the goods-producing sector rose 27,000, the second consecutive monthly gain and the largest since February 2006, while manufacturing employment rose 23,000, also the second consecutive monthly gain, noted Joel Prakken, chairman of Macroeconomic..
“After a mid-2010 pause, employment seems to have accelerated,” he added. “Nonfarm private employment grew very strongly in December, at a pace well above what is usually associated with a declining unemployment rate.”
That trend picked up speed this month as Ford Motor Co. announced it would add 7,000 new hourly and salaried jobs between 2011 and 2012 in the U.S., with nearly 4,000 hourly jobs to be added this year alone. Ford also noted it plans to add 750 salaried engineering jobs in product development and manufacturing.
It’s those kinds of numbers that are helping improve “employment confidence,” a metric tracked by the Conference Board – though the group cautioned that it doesn’t project a huge drop in overall unemployment figures anytime soon.
The Conference Board’s Employment Trends Index (ETI) increased in December for the third consecutive month, rising to 99.3 from November's revised figure of 98.5. The index is up 7.6% from a year ago, noted Gad Levanon, associate director-macroeconomic research for the Conference Board.
“The improvement in the ETI in recent months suggests employment growth is likely to accelerate moderately in the first half of 2011,” Levanon said. “While this is a welcome improvement, we don't expect employment to grow fast enough for the unemployment rate to dip below 9% for the rest of the year.”