When America’s Bureau of Labor Statistics released data this month showing that consumer price inflation had surged to 7 per cent, many investors were shocked. No wonder: this marks the fastest jump since 1982.
But here is another number that should spark concern: 17 per cent. That was the annual inflation rate for overall trucking costs last month, according to a (deeply buried) section of the bureau’s data. For the long-haul trucking sector, the number was even scarier: 25 per cent.
That is bad news for business — and consumers — given that almost three-quarters of freight in America is moved by trucks. Or to put it another way, if you want to understand what lies behind that scary 7 per cent inflation number, don’t just track raw material, energy or cross-border shipping costs; watch those oft-ignored truckers too.
So is this price explosion just a “transitory” glitch, to cite the phrase employed by Federal Reserve officials last year? It would be nice to think so. After all, basic economics would suggest that a surge in trucking demand — of the sort seen in America as the economy rebounded from the pandemic slump — should prompt red-blooded capitalist businesses to increase supply (by finding more trucks and truckers), curbing inflation. Indeed, at the start of the pandemic, economists at the BLS released a lengthy study that argued the trucking market was a place where labour supply could indeed adjust to demand, just as free-market enthusiasts might expect.
But these days it is proving strikingly hard to expand capacity, due to so many underlying structural impediments in the market. What the current economic boom has revealed, in other words, is a host of shortcomings around trucking that were previously either concealed — or ignored. And that makes trucking a potent symbol of America’s wider problems in its political economy. The problems revealed in the transit world are anything but “transitory”.
To understand this, consider the issues behind that price surge. One is the rise in oil prices, and the fact that chaos in global supply chains has thrown domestic trucking cycles awry. But the bigger issue seems to be a lack of human truckers.
Chris Spear, head of the American Trucking Associations, said this week that the sector (with around 3m hires overall) is currently short of 80,000-odd workers. Some of this shortfall reflects a Covid-linked delay in people returning to their jobs. However, Spear reckons this figure will double in the coming years.
At first glance, that might seem odd. After all, a few years ago pundits were predicting that blue-collar trucking jobs would be wiped out by robot drivers.
But in reality, any widespread switch to automation is unlikely to happen for many years, because of political opposition and regulatory constraints — voters and politicians are terrified of those robot truckers. Meanwhile, young workers seem to be shying away from the job; four out of five truckers today are over 45.
That might be because of all the robot chatter. However, there are practical — short-term — reasons for the trend. On paper, truckers can earn around $100,000 a year, a high wage for blue-collar work. But entrants need state licences, both costly and time-consuming to acquire.
Moreover, these days most drivers work as self-employed contractors, and “bear the burden of gas, insurance, and maintenance costs, which reduces their take home pay”, as a White House paper noted last month. Even in normal times, this makes the job precarious, particularly since “long-haul full-truckload drivers only spend an average of 6.5 hours per working day driving despite being allowed to drive a maximum of 11 hours” — and are not paid for their idle time.
During the pandemic, however, the insecurity has become worse due to medical risks and unpredictable supply-chain delays. As a result, other blue-collar jobs — like construction — seem increasingly attractive. As trucker Omar Alvarez recently declared in an opinion piece: “The real shortage is a shortage of good, union jobs that fairly compensate workers and treat us with the dignity and respect we deserve.”
Is there any fix? The White House is trying to use industrial policy tweaks: last month it pledged to reduce the minimum age for trucking to 18 from 21, target veterans, force states to simplify their licensing system and work with states to subsidise training. Trucking companies are trying to embrace innovation, using artificial intelligence platforms to manage schedules or Spanish-speaking recruiters to tap the Hispanic market for more workers. Companies are also paying more, causing take-home pay to jump by some 7-12 per cent this year, according to the White House.
But this is unlikely to plug the driver gap soon; or not without even more dramatic rises in wages, a better driver safety net or a sudden decline in economic demand. The latter might emerge; December’s month-on-month trucking inflation data was lower than in November.
Since the monthly series is not seasonally adjusted, however, it is dangerous to read this as a trend. Right now, the key point is this: those truckers are a potent sign of how hard it will be to halt inflation with monetary policy alone. Therein lies the dilemma for the Federal Reserve — and the White House.
gillian.tett@ft.com
Source: Economy - ft.com
