Stagnant unemployment, increasingly volatile energy prices, and disappointing retail sales are underscoring that the slowing economy is becoming a trend— not a blip.
Today the Bureau of Labor Statistics said the economy added a meager 96,000 nonfarm jobs to the economy, keeping the unemployment rate locked at 5.4%.
“It’s concerning— the economy is definitely slowing down with several months of sluggish growth,” Commercial Motor Vehicle Consulting (CMVC) president Chris Brady told Fleet Owner. “The economy is decelerating probably because of high energy prices, which means the possibility of a downturn is increasing. The deceleration in the economy isn’t unexpected just because it had to adjust to high energy prices.”
The current trend of record-setting crude oil prices coupled with a trickling influx of new jobs indicate consumers are getting squeezed. And this is becoming apparent at the cash registers. The Wall Street Journal said today that retailers are reporting disappointing sales, with back-to-school sales seen as “a bust.”
“Consumers are paying more for energy-related commodities,” Brady said. “And with employment sluggish, that probably implies spending on non-energy commodities would be sluggish to declining. If you get a downturn in retail sales for a few months, the result is inventories becoming excessive.”
If the economic pull on the supply chain— the consumers— stops pulling, the result would be a lag in manufacturing and freight movement, Brady explained.
And now that a slowing economic trend has been established, the question that remains is how severe will the repercussions be. “The concern is does it decline at a moderate rate or does it really slow down to the point of a down turn. It’s hard to pick either way,” Brady said.
On the other hand, the latest numbers on the manufacturing sector do indicate growth. In a separate report released by the Census Bureau, new orders took a slight 0.1% dip in August after a stout 1.7% gain in July. The backlogs are continuing to grow, up 0.3% in August.
The index in the September manufacturing ISM report took a 0.5% decline, but still reflected positive growth. “The manufacturing sector continued to grow during September, but at a slightly slower rate. Both new orders and production remain strong, and employment growth accelerated,” stated Norbert J. Ore, chair of the Institute for Supply Management.
“It’s pointing to, for the short term at least, strong manufacturing,” noted CMVC’s Brady, pointing again to slowing consumer spending. With inventories currently relatively lean and retailers trying to build up stocks, the manufacturing and trucking sectors appear to be enjoying good times despite the realities of the consumer situation.
Brady expects those good times will lag the stagnating consumer indicators by one quarter.
“Going forward, I’m forecasting a slowdown in freight demand. With consumer spending slowing, freight will have to slow,” Brady said.