“Panelists do remain confident about the [current global economic] expansion’s durability, but are concerned about high levels of government deficits and debt, excessive unemployment, and rising commodity prices.” –Richard Wobbekind, associate dean of the Leeds School of Business at the University of Colorado and president of the National Association for Business Economics
In a lot of ways, it feels like 2008 all over again – and that wasn’t a very good year for anyone, much less those in the trucking business.
As we all so painfully remember, oil shot up well over $100 a barrel, reaching almost $150 by the summer before crashing – along with most of the world’s economies – down to $33 or so a barrel.
Now, suddenly here we are again, staring at $112 and up for a barrel of crude, with the average price of diesel fuel in the U.S. sitting a mere 25 cents below $4 a gallon – and that’s not a number any trucking operator wants to see these days.
Predictions so far indicate we’re going to be experiencing high oil and fuel prices for a while, too – not because supplies of oil are short, mind you, but because oil traders are worried about all the civil unrest (dare we use the word ‘revolution’ here?) going on in North Africa and the Middle East these days.
Tunisia and Egypt saw their in-all-but-name dictators suddenly swept from power, and 14 days of civil war in Libya has brought the regime of Col. Moammar Gadhafi – in power for over 40 years – to the brink of ruin.
So the question for all of us watching all of this unfold is this: if oil prices stay high, will our economies tumble back into recession? This is a burning issue for the trucking industry for while the experts I’ve talked to say it can withstand a short-term spike in diesel prices, high oil prices over a longer-stretch will reduce incremental freight that have kept tonnage volumes on the upswing since late last year.
Yet the economic fundamentals in the U.S. might not be in as bad of shape as some fear. Sure, the housing market is still in disarray and that’s going to take a long time to recover and, yes, federal budget deficits need to be brought under control (the sooner the better), but in the view of some pretty savvy economists, things might be better than we think.
For example, the National Association for Business Economics (NABE), for one, recently released its “macroeconomic forecast” for 2011 and 2012 based on the erudite research of 47 big-time thinkers, with in-depth analysis from the likes of: Richard DeKaser, The Parthenon Group; Nayantara Hensel, Department of the Navy; George Kahn, Federal Reserve Bank of Kansas City; Ardavan Mobasheri, AIG; and William Strauss, Federal Reserve Bank of Chicago. [I’ve heard Strauss speak before, and this guy knows his stuff.]
“The NABE panelists revised their projections for economic growth in 2011 upward from their November projections. Real GDP[gross domestic product] is expected to grow at a moderate pace of roughly 3.5% through the current year and into 2012,” said Richard Wobbekind, associate dean of the Leeds School of Business at the University of Colorado and NABE’s president.
“Factors supporting growth going forward include pent-up consumer and business demand, strong growth in foreign economies, especially those in Asia, and accommodative monetary policy,” he added. “Factors restraining growth include financial headwinds, uncertainty about future federal government economic policies, a tepid housing market, and sustained high unemployment.”
The NABE’s panel also expects growth in 2012 to edge up to 3.4% (year over year)—a pace somewhat above most estimates of the economy’s long-run growth potential, but still consistent with the moderate pace of growth that typically occurs in recoveries from severe financial crises.
Now, though this latest NABE forecast reflects greater confidence that financial headwinds will gradually begin to subside, it was conducted before the current run-up in oil prices occurred, so we have to keep that in mind.
Still, almost 40% of survey respondents think the recovery will continue at a moderate pace, with output growth close to or slightly above potential, with one third more “optimistic,” feeling that the economy will overcome its headwinds and behave more in line with a traditional business-cycle expansion.
Only 11% of respondents characterize the expansion as “subpar with severe wealth losses and onerous debt burdens inhibiting spending and lending,” down from the 40% of panelists who held this view in November.
The likelihood of either stagflation or the economy slipping back into recession continues to be viewed as relatively low, although 10% of respondents think that the recovery will be uneven and dependent on stimulus policies, NABE reported.
Labor market conditions are expected to continue improving at a moderate pace, with monthly payroll gains forecast to average 178,300 this year, but to rise throughout the year, reaching 210,000 per month in the final quarter of 2011, the group’s panel said, while employment gains will edge a bit higher in 2012, rising 215,500 per month.
The NABE’s outlook panel expects joblessness to remain high, however, with the unemployment rate averaging 9.3% in the first quarter of this year and edging down to 9% in the fourth quarter of 2011. The unemployment rate is then anticipated to decline to a still-high 8.2% in the final quarter of 2012, the group noted.
Again, though, will the run-up in oil prices we’re experiencing derail a lot of this? Well, that depends on too many factors to count, frankly. Still, despite the great uncertainty poised by oil and the way-too-high deficit spending levels of the U.S. government, the economic fundamentals seem to be improving. And for truckers still trying to recover from years of tough times, that’s pretty good news, all in all.