US Economic Conditions Worsen As Railroad Car, Dry Van Volumes Crash

The transportation industry is known for violent swings of prosperity or poverty. Given that most freight moves by truck and heavy industrial materials or agricultural products by train, there is a relationship between the two and general economic health.

US economic health has not been well for a long time. This not to say there have not been periods of prosperity during the last twelve years since the 2007 recession. However, one is not concerned with what are temporary bouts of prosperity as it compares with general longer-term decline, which is what is happening today and is going to be a major trend for the future as the Boomers retire and the Millennials and soon-to-be Zoomers, realizing their general impoverishment, the social conditions in relationship to the economic decisions that caused it, and the refusal to fix them in addition to other changes taking place, will bring about a further decline of the state of the nation. People cannot purchase what they cannot reasonably afford with their own wealth or by debt, and if this cannot happen then wealth theoretically cannot grow, as wealth comes by trade.

The first matter is that of the railroad industry, which had declined in direct relationship to the worsening conditions for the US manufacturing sector.

As manufacturing plummets to the weakest levels since September 2009 and new export orders collapse, the US railroad industry has jus seen carload volumes tumble to three-year lows, according to a weekly report from the Association of American Railroads (AAR), first reported by Bloomberg on Monday.

AAR’s report showed a decline in carloads for 3Q19, down 5.5%, and one of the most significant drops in three years, indicating that the US economy continues to decelerate into year-end. Most of the shipment declines were seen in autos, coal, grain, chemicals, and consumer goods, but there was a small improvement in crude oil shipments.

Now, “there are no pockets of growth,” said Bloomberg Intelligence analyst Lee Klaskow, who said a “railroad recession” could be imminent in a recent report. “There’s really nothing that’s tapping me on the shoulder saying, ‘Hey look at me. I’m going to be your next growth engine.'” (source)

These issues are reflected in a similar way through the trucking industry, which for all of her issues is arguably the most important sector of the US domestic economic plan in terms of logistics, since the trucks are what bind small towns to cities to farms to uninhabitable areas in all parts of the country. If the trucks were to theoretically stop moving, it would likely be a matter of three days before the entire US would shut down. It is also an unspoken reason why the US military is so heavily invested into training truck drivers in the armed forces as well as in the development of self-driving trucks, for while they are very important in war, they are just as important to ensure peace at home. If there ever was to be a massive strike by truckers- which the government would see to it that it does not happen -there would be threats and then actions of mass arrests of truckers who refuse to “get back to work”, and if it had to happen, the army would take over deliveries until order could be restored.

Now there is a tremendous difference between a strike and general economic decline. However, what I speak of is the volume of trucks on the road and the orders of new trucks being submitted, for variances in these numbers speak to how much freight and by that, goods are being moved to different parts of the country.

Having noted this, there was another round of trucker layoffs in August as well as a drop in orders for trucks at about the same time.

Continuing declines for Class 8 orders in 2019 are a result of weaker freight indicators – traditionally seen as a good gauge of the overall U.S. economy – and declining used Class 8 truck prices.

Frohnapple’s outlook for September is also grim. He continued: “We anticipate that Class 8 net orders will remain depressed and in the low- to mid-teen range for the month of September as the market continues to correct.”
Last month, the industry booked 10,200 units, an astonishing 81% year over year fall, according to ACT Research.
July’s number was also down 21% from June and marked the lowest monthly order tally since February 2010. Net trailer orders also continued to plunge, according to data released last month. Updated net trailer order data for August will be available within days, at which point we will update these figures. (source)

Now there are expected swings in the industry throughout the year. These are normal. However, the concern is how it fits into the long-term picture.

Back in 2012, it was reported that given the economic conditions, either there would likely be a sharp crash (hyperinflation), or a long-term prolonged decline. Almost a decade later, the latter seems to be the plan that is taking place.

The concept of “job stability” as it was presented during the twentieth century is no more, and one should not expect it to return. Many jobs and job patterns have changed, and the rise of artificial intelligence will see to that.

One cannot stop change from happening, and instead of reminiscing on the past which cannot be changed, it is better to focus on building up skills for the future that will work with the pending economic changed. Human history does not ever show a “return to simplicity,” and those who long for the days of the Victorian Era, Medieval Period, or Iron Age depending on one’s proclivities will find themselves disappointed. Even the barbarian destruction of Rome did not destroy the Roman roads, which are still used to this day. Even the Silk Road, which was overran by the Muslims, has only been temporarily disrupted, and is reviving itself for the 21st century with the massive railway projects taking place right now.

The changes cannot be stopped, but basic historical patterns and ideas remain constant. It is good and important to watch the declines taking place, but having noted the declines, it is then for one to see how one can fit himself into the changing paradigms to best benefit oneself, his family, and his communities in a morally acceptable way.

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