LAS VEGAS. Motor carriers and supplier executives from across the U.S. and Canada who gathered here this week for the 72nd annual convention of the Truckload Carriers Association shared stories, mourned industry losses and expressed a cautious optimism that the worst is over and better economic times are ahead.
There was solid evidence to support that optimism, too, from attendees and guest speakers who each carefully weighed the gains made against the work left to be done.
Many carriers reported increases in freight levels, suppliers counted improved order backlogs, and new products and services were unveiled that helped to signal that trucking is preparing for a rebound sooner rather than later.
During one session, chief economist and co-founder of Moody’s Economy.com Mark Zandi gave even more tangible shape to the flickering spirit of optimism in his presentation “Economic Boom or Bust…Your Roadmap Back to Profit.”
“The economy is better today than it was a year ago, and next year it will be even better,” Zandi said. “We are headed in the right direction.”
Zandi made four key points:
- The ‘Great Recession’ is over.
- Recovery is fragile, however.
- It is important for policy makers to remain aggressive.
- Federal support does come at a cost – increases in the deficit.
According to Zandi, the recession ended in August 2009, leaving the U.S. with a gross domestic product (GDP) down some 4% from its peak and 225,000 fewer people working in the trucking industry. “This January, however, we actually saw some job growth,” he noted. “In trucking, tonnage is picking up. Current growth is about eight percent, which is actually quite strong. By this time next year, banks will be lending more to businesses and consumers again.
“In my mind, there is no co-incidence that recovery began when federal stimulus [spending] was at its peak,” he added. “Unemployment benefits have been critical, housing tax credits and cash for clunkers [also made a positive impact]. The global economy has turned the corner, especially in Asia, where China, not the U.S., is leading the way out of the recession. China has helped to support our export growth.”
As evidence of the fragility of the recovery thus far, however, Zandi cited several factors, including that hiring remains dormant even though layoffs are abating and the foreclosure crisis continues to mount as well. “Smaller businesses are not hiring because they are not getting credit yet,” he noted, “and small business accounts for half of all jobs in the economy.”
According to Zandi, businesses are suffering from a lack of confidence due to the fact that mission-critical policies are still being debated in Congress, creating an atmosphere of uncertainty. “People also suffered through near-death experiences in their businesses,” he observed. “They were scared to death just a year ago and you don’t forget that soon.”
Zandi expects foreclosure sales to ramp up again this summer and fall and predicts that housing prices will also probably drop further, too. The sorry fiscal condition of state and local governments is yet another health threat to the recovery, he noted, and states are by far the largest employers in the country. “State and local government tax revenues have collapsed,” Zandi said, “There is a big gap between expenses and revenues. If states don’t get more help from the feds, [they are facing big cuts in services.]”
When it comes to policy-making, Zandi was firm in his opinion that policy makers have to remain aggressive and provide support. “We can’t afford to go back into recession, so we have to err on the side of caution,” he noted. “We need to maintain the almost-zero interest rate for quite some time to come.”
Zandi also listed several other moves he is hoping to see, including a further extension of unemployment benefits. “It would be very heartless to fail to extend those,” he noted.
Concerning federal involvement in private business, Zandi noted that he was “a strong advocate of government support in this case, which is very odd for me. Usually I want government to stay as far away from business as possible.”
Like many convention attendees, Zandi did voice serious concern over the growing national deficit. “Financial austerity is in our future,” he said. “The President’s budget is unsustainable in the long term. By 2020 we could have an 85% debt-to-GDP ratio, but the economy will break before then. Crisis is in our future unless we change.”
The way out of the debt crisis, according to Zandi, is to raise taxes, but by levying VAT taxes, rather than increasing income taxes. “VAT taxes, which are really a sales tax, are very efficient in raising revenue,” he noted, “and they tax consuming rather than saving.”
He also recommended imposing taxes on the very large financial institutions that taxpayers are supporting and changing some entitlement programs to make them more like insurance programs, where benefits are only awarded as needed, rather than automatically.
Ending on a positive note, Zandi said that he expected the economy to be “off and running” a year from now.
