While the global economy is being rattled by Trump’s protectionist stance on trade, renewed uncertainty about the future of the Eurozone, and capital outflows from some emerging markets, the US economy is barreling along. Real GDP may be starting to do so at a faster speed now, exceeding the so-called 2% “stall speed,” which was the so-called “New Normal” from mid-2010 through Q1-2018. Consider the following:
(1) A supercharged quarter. On Friday, the Atlanta Fed’s GDPNow model boosted the Q2-2018 real GDP growth rate to 4.8%. That’s up from 4.7% on May 31. Here are the details: “The nowcasts for second-quarter real consumer spending growth and second-quarter real private fixed investment growth increased from 3.4 percent and 4.6 percent, respectively, to 3.5 percent and 5.4 percent, respectively, after the employment report from the U.S. Bureau of Labor Statistics, the construction spending report from the U.S. Census Bureau, and the Manufacturing ISM Report On Business from the Institute for Supply Management were released this morning.”
(2) Truckers lost and found. The ATA Truck Tonnage Index rose solidly by 9.5% y/y to a record high in April. It’s been rising into record territory consistently since 2013. Its y/y growth rate is a good coincident indicator of real GDP growth, though the former is much more volatile than the latter.
Could it be that all the chatter about the shortage of truck drivers is misguided? How else to explain the record high in truck tonnage? There is a good correlation between the ATA index and payroll employment of truckers. Friday’s employment report showed that payroll employment in the truck transportation industry has been stuck just below 1.5 million for the past six months, but it is at a record high and up 24,200 y/y.
Starting at the end of last year, a new federal rule requires all interstate truck drivers to install an electronic logging device, or ELD, that logs their hours. Truck drivers are required to reduce their overtime hours because fatigued ones have been involved in major crashes on the highways. That could exacerbate the perceived shortage of workers. The y/y growth rate in the average hourly earnings of truckers is very volatile, but April’s increase of 2.5% was relatively subdued and belies the shortage-of-truckers chatter.
(3) Earned Income Proxy rising. There has also been lots of chatter about a shortage of workers in other industries. Yet overall wage inflation remained moderate at 2.7% y/y during May. However, it continues to exceed price inflation, currently running around 2.0% recently.
According to the payroll survey, employers in the private sector managed to find 218,000 net new hires last month, a solid increase for sure. According to the household survey, the number of full-time employees rose a whopping 904,000 last month to a new record high. Manufacturers have increased average overtime weekly hours from 3.2 hours a year ago to 3.5 hours during May.
Aggregate weekly hours worked for all private industries rose to a record 4.36 billion hours during May, up 2.2% y/y. Our Earned Income Proxy, which closely tracks wages and salaries in private industries, rose to yet another record high last month. This augurs well for consumer spending in particular and GDP in general.