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Jason Miller
Supply chain professor helping industry professionals better use data
Jason Miller is a dedicated educator and industry expert with over a decade of experience in academic research and statistics. He specializes in helping practitioners and students understand industry trends using reliable data sources and data processing techniques. Jason's focus is primarily on supply chain management, particularly within the for-hire trucking sector. Currently, he holds the position of tenured Associate Professor at Michigan State University's Eli Broad College of Business, where he teaches the capstone supply chain management course.
Highlights
On this Labor Day, I thought it appropriate to share two charts showing the evolution of average hourly earnings for production and nonsupervisory workers in motor vehicle manufacturing (NAICS 3361). Data sourced from the Bureau of Labor Statistics Current Employment Statistics Program, with inflation adjustment done using the personal consumption expenditures chain-type price index from the Bureau of Economic Analysis. Thoughts:
•Top plot shows nominal wages. Back in the mid-1990s, that number was ~$24.00 an hour. That number rose to ~$30 an hour during the 2004-2007 period before staying flat though 2019! The explosion we see at the end of the series is the result of the last UAW contract that was cemented in Q4 2023. Wages were almost up to $39 an hour in June 2024.
•The bottom chart displays a truth; in inflation adjusted terms, wages today are no where near where they were through much of the 1990s and certainly 2002-2006. In 2023 dollars, real wages maxed out at ~$44 an hour in late 2002 and early 2003.
•Even with the sharp upward movement in nominal wages, we have seen real wages just hop back to 1990s levels.
Implication: the UAW has a long way to go until real wages for line workers in U.S. motor vehicle assembly plants get back to their highest levels. It will be interesting to see how efforts to expand unionization, especially in the South, play out over the coming years.
#economics #markets #manufacturing #freight #trucking
One theory that has gained attention about dry van truckload pricing dynamics is what I’ll call the supply side bull market theory. My understanding of the argument is that a bull market pricing cycle could be started because too much capacity exits the market in response to low rates, as opposed to an increase in demand. I’ve been strongly critical of the supply side theory, as it is inconsistent both empirically and theoretically with how trucking pricing cycles behave. One chart below as evidence. Thoughts:
•This chart shows quarterly seasonally adjusted trucking ton-miles on a quarterly basis. I’ve called out several quarters in black with sharp increases in ton-miles: Q2 2014, Q2 2017, and Q3 2020. The thing all three of these quarters have in common is they saw sharp increases in truckload spot prices and the onset of bull market pricing conditions.
•I’ve also called out three quarters in red: Q1 2015, Q4 2018, and Q3 2022. These quarters saw decreases in seasonally adjusted ton-miles and correspond to the start of freight recessions on a volume basis (note, 2022’s data could get shifted around with benchmarking still to be conducted from the Economic Census).
•What’s worth emphasizing: it’s changes in the trajectory of demand that bring on bull or bear markets. The key reason the supply side theory breaks down is trucking capacity (supply) is strongly price elastic, meaning that if we start to see prices rise, capacity will also rise (though with a lag). As such, once demand growth slows enough (or especially turns negative), supply exceeds demand, and pricing power shifts.
•The challenge I see with the rest of 2024 is there isn’t a foreseeable demand shock like in Q2 2014 – Q4 2014 or Q2 – Q4 2017 to kick off bull market dynamics.
Implication: we won’t enter the next truckload bull market pricing cycle because too much capacity exits. Capacity exit can only bring us to equilibrium where we experience normal seasonal ebbs and flows in capacity tightness. Positive demand shocks bring bull market pricing cycles. With multiple interest rate cuts, we could (emphasis on could) see a positive demand shock begin in Q2 2025.
#supplychain #supplychainmanagement #markets #freight #trucking
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