Pick an indicator, any indicator…
I recently attended a conference for flatbed fleets owners. These small business owners are extremely bullish on flatbed freight in the second half of the year. Their rosy business outlook mirrors some of the small business confidence surveys that have been reported.
This is significant, because flatbed trailers haul a wide variety of industrial freight from numerous industries. If flatbed freight is strong, then manufacturing and the industrial sectors should be robust as well.
The sentiment from the fleet people is consistent with the FTR forecast which has freight loading increasing over 5% year-over-year in the second half of the year, with flatbed loadings up over 9%. If you choose flatbed freight as your key indicator, the economy is looking robust in the second-half of the year.
The Employment Numbers
Normally, a 4.3% unemployment rate would indicate a vibrant labor market. If you ask someone looking for a professional or living wage job, however, you will probably hear the market is not as good as it seems. Sure, the job market continues to crank out “barista-type” positions at a healthy clip, but that is not what is needed to boost this economy.
The Labor Department just reported that job listings reached an all-time high; however, actual hiring is down about one-third from a year ago. This would indicate structural unemployment (where workers lack the skills for available jobs) is unexpectedly getting worse.
The official unemployment rate is significantly impacted by a low labor participation rate. Aging demographics aside, many potential workers can’t pass a drug test, and the expansion of the safety net during the recession has created disincentives to working. Ask any HR person at a growing company, and they will tell how difficult it is to find new workers.
Yes, there are a decent number of hires reported every month, but wages are not rising fast enough to make a difference, and job growth is still not sufficient to replace jobs lost during the recession. If you select employment as your indicator, you expect just more of the same.
Stocks and Bonds
The stock market is booming, reaching record highs, and some analysts are trumpeting great upside potential. The bond market, however, is flashing yellow, if not red, signaling a slowdown in the economy. So, if you use stocks as a predictor, things are going to boom. If you choose bonds, look out for a bust.
The Business Roundtable said its survey of executive economic outlook hits its highest level in three years. The executives are anticipating new legislation to boost business. If you chose this indicator, it’s boom time for the economy.
However, POTUS approval ratings are in the cellar, raising doubts that anything gets accomplished. If you go with this stat, then the economy gets worse.
Total bank loans have peaked and have started to fall. The last three times this occurred, recessions followed. If this is your indicator, put your money into gold and run for the hills.
The Forward-Looking Indicators
A few months ago, I predicted stronger growth for the economy this year. This was based on these indicators showing marked improvement. However, the current numbers, while still positive, have slipped a bit. What looked like a trend now appears to be just a normal, moderate upcycle. The type we’ve seen repeatedly in this recovery. These indicators would suggest a strong Q2 and Q3, with a falloff in Q4.
The Wall Street Journal economist survey has Q2 GDP at 3.1% (range from 1.6 to 4.0%), Q3 at 2.6%, and Q4 at 2.5%. GDP for 2017 is 2.3%. This makes sense; if there is no clear direction, you must forecast more of the same.
Pick an indicator, any indicator. Uncertainty still rules as there is no clear direction. In the end, though, it appears we are going to continue to go nowhere slowly.