Pundits will soon be warning us about an economic slowdown in the U.S. for 2005, and much of what they say could lead us to conclude that the economy is faltering. But it is not.
Let's start with a few basic assumptions. We can expect more job openings than the number of people looking for jobs, which means lower levels of unemployment overall. As far as specific job categories are concerned, we'll need fewer dot-com executives but more manufacturing and service employees. So while the average wage may be lower, it's also more likely to be sustainable.
And since wages and benefits are expected to rise 4% to 5% above the rate of inflation, average incomes will actually be higher. This translates into greater consumption of all types of goods and services.
Some people want to focus solely on the wage portion of the earnings picture. But this can be misleading because the benefits portion of a wage package is equally important. Health coverage, pension plans, state-mandated support systems, etc., complement rather than supplement wages. It's the total wage and benefits package that attracts and keeps employees-not just wages. Employers compete with one another within and across industries to attract qualified employees. Pay rates alone are not enough to win this competition.
We all consume a variety of goods and services, not the least of which is the peace of mind that comes from knowing that our benefits package will allow us to get through unforeseen medical emergencies or help us plan for a more comfortable retirement than our personal savings would allow. This has been the case for as long as I can remember.
What has changed, however, is the headlong rush to increase economic growth at faster-than-sustainable rates. In the near future, we're likely to hear statements that run something like the following: “In 2005, retail sales will grow 3.5% over 2004 levels. This represents a substantially slower growth rate than the 6.5% gain posted during 2004.”
In terms of simple arithmetic, that statement is accurate. But the emphasis is on the wrong syl-LA-ble. It's not the slowdown in growth that's remarkable — it's the fact that this giant of an economy is growing in terms of both output and consumption by a greater amount than the past 10-, 20- and 30-year averages.
I like to use the elephant and hippo as stage props to explain just how “big” big is. When a hippo grows by 5%, less is added to the overall size of the animal than when an elephant grows by 3.5%. Our economy is an elephant; Europe's economy is a hippo. During 2005, the U.S. economy is expected to grow by 3.5% and the European economy is expected to grow by less than 2%
Our GDP per capita, disposable income per capita, etc., will all be growing at a faster clip than nearly all other economies in the world, including China. Forget the percentage gains — the actual meat added to the bone will be significant.
This is good news for trucking. We'll need lots of capacity to move the goods that individuals and businesses will consume this year.
What's more, the compounding effect of 3.5% growth over the next five years could create enormous pressures on our distribution system. We simply have to become more efficient.
I'd hate to see headlines predicting poor retail performance come true because we aren't prepared to move the freight. We will need more trucks, trailers and drivers to handle that “meager” 3.5% growth. Trust me.