Guest post by FreightWaves’ Chief Economisr Ibrahiim Bayaan
Job growth rebounded nicely in March as employers added nearly 200,000 workers to payrolls during the month. This strength in hiring did not translate to the trucking industry however, where payrolls declined for the first time in nearly a year.
The Bureau of Labor Statistics (BLS) reported that the economy added 196,000 workers to payrolls in March. This beat out consensus estimates of a 177,000 job gain and serves as an impressive rebound after last month’s poor showing of 33,000 jobs added. As is usually the case, hiring during the month was primarily driven by the service sector, led by big gains in healthcare and hospitality services. Hiring within retail continued to struggle, however. The sector shed nearly 12,000 jobs for the second consecutive decline. On the goods side of the economy, the construction industry added 16,000 workers in March, while manufacturing employment fell by 6,000.
The healthy pace of hiring was enough to keep the unemployment rate at 3.8 percent during the month, close to the near 50-year low of 3.7 percent set late in 2018. Wage growth provided the lone major source of disappointment in this month’s report, as average hourly earnings climbed by just 0.1 percent from February’s levels. As a result, year-over-year growth in wages slipped to 3.2 percent in March, down from 3.4 percent in the previous month.
Transportation and logistics hiring rebounds, but employment within trucking declines
Hiring within the transportation and logistics sector rebounded slightly during the month, rising by 7,300 after February’s 4,700 decline in employment.
However, gains in the sector did not carry over into the trucking industry, where payrolls declined by 1,200 in March. This marks the first decline in trucking employment since April 2018, ending a stretch which saw nearly 35,000 jobs added in the industry. In addition, growth from February was revised downward, showing that only 100 jobs were added within trucking. Despite the decline, trucking employment is still 1.9 percent higher than at this point last year, outpacing the 1.7 percent growth in the overall economy.
Behind the numbers
The March jobs report was one of the more closely watched employment reports in recent memory, as many analysts were beginning to wonder whether some of the softness seen in other areas in the economy was beginning to filter into the labor market after February’s disastrous results. In fact, that is typically how recessions emerge in the economy; a shock occurs to affect business investment or trade, hiring falls as the economy slows, then consumer spending reacts as incomes go down.
To that end, the March results are encouraging and should ease some concerns that the economy is already hurtling towards recession. It is always worth reiterating, however, that hiring trends lag weakness in the overall economy, and hiring may still slow if the economy further weakens. The trends in retail hiring help to illustrate some of this, as the jobs cuts in February and March are likely the result of the weak retail performance since December 2018. Data from the service sector has held up fairly well, however, while other areas of the economy have struggled, and it’s not surprising that hiring on that side of the economy has remained strong as a result.
On the trucking side, the decline in March and the revised small positive gain in February raise some significant concerns about the outlook for hiring in the industry. Over the past year and a half, hiring in trucking advanced at a rapid pace, as the industry tried to cope with a shortage of capacity in the face of rapid demand growth. The BLS monthly numbers aren’t an exact measurement of the number of drivers, mostly because they only capture employees that are on payrolls, but they do serve as a useful indication of how driver hires may be proceeding. Now that demand growth has cooled and the industry has added capacity, many carriers may no longer feel the pressing need to bring on as many drivers. Two soft readings are not enough to establish a change in trend, but it is enough to deserve attention.