When the pandemic started for us in the United States, my wife and I were on vacation. We were in the Okefenokee National Wildlife Refuge, which are wetlands straddling the Florida – Georgia line, ‘wetlands’ being code for swamp. The swamp is about 438,000 acres with hiking, fishing, and staying away from alligators as high on the list of things to do. I would like to give Stephen Foster State Park, which calls the swamp home, a special shout out. The place is wonderful.
Now some fourteen months later to the week, with more vaccines being given every day, many of our leaders are clearly stating, the worst is behind us and it is time to get back to business. Where were my wife and I some 426 days later when the pandemic was finally being called ‘all but over’? On vacation of course. Hey, don’t judge.
The vacation this time was the opposite of our swampapalooza of March 2020, we went to the mountains of North Georgia to Unicoi State Park & Lodge near the town of Helen. Mountains in Georgia? You bet. We are from Jacksonville, Florida. Coming from Jacksonville where the elevation is 16 feet above sea level, the 1775-foot elevation of Unicoi seemed like hiking in the Andes Mountains. Once again, the hiking and fishing opportunities were almost endless, but with no alligators. There is also the German themed tourist destination of Helen, GA a short drive away for those wishing to walk the streets, buy things, eat in restaurants, and drink German beer.
What a difference 426 days makes. On March 15th, 2020 as we made our way through the Okefenokee Swamp, international trade lanes were crippled and shutting down due to the pandemic. My phone wasn’t ringing, and my inbound emails were few. It was a good time to be in vacation mode. On May 15th, 2021 at the ports of Los Angeles and Long Beach, there were near 20 container vessels still anchored offshore waiting to be unloaded, business was brisk, and I was working a normal schedule while on ‘vacation’. The photo below was my work window view. Some day I will get a real grown-up’s job with actual vacation time.
So, there is a back-up at LA/LB Ports. Is that really a recovery? Moreover, will transportation rates throughout the supply chain remain high? While there is little doubt certain sectors and regions are still suffering, I argue it is not really a recovery. I believe there are indicators that point to we are better off now than we were before the pandemic and supply chain costs won’t be going down anytime soon.
Normally people compare summer of 2020 dark day pandemic numbers to pre-pandemic numbers to show how far we fell. Instead of comparing numbers from before the pandemic to June 2020, or dark days June 2020 to near post pandemic today, let us compare numbers from BEFORE the pandemic to today.
First, there is the Purchasing managers Index (PMI). The PMI is a numbered scale of 1 – 100 of how surveyed purchasing managers feel about the potential for growth, or conversely retraction, of the economy. Anything above 50 is an expectation of growth, the higher the number, the higher the expectation with 50 being neutral. Anything below 50 is an expectation of retraction of the economy, the lower the number the more pessimistic the view.
PMI Jan 2020 50.90
PMI Jan 2021 58.70
PMI Today 60.70
The indication here is our purchasing managers were more optimistic during the later pandemic, and today, than they were before the pandemic in Jan 2020. Moreover, if we go back to May 2019 PMI (24 months ago) the PMI was 52.10. It seems clear today are more heady days than before the pandemic.
Some will say the optimism is due to more room for growth because of the hard and far fall we have taken due to of the pandemic. Let’s look at that by looking at the GDP under the same light as the PMI.
In Jan 2020 the GDP level was 21.85T,
in Jan 2021 the GDP level was 21.99T,
and today the GDP number sits at 22.41T which is clearly a high mark.
This is important. It shows increases since before the pandemic (Jan2020) were not only remarkable as a comeback number from the dive of April 2020 to 18.58T, but it also shows the GDP has surpassed pre-pandemic levels. GDP information gathered at Ycharts US Monthly GDP (ycharts.com) if you wish to drill down further.
Granted, today the national unemployment rate sits at 6.1% and in Jan 2020 the number was at 3.5%. That would be an indicator we are not doing all that well as before BC (Before Covid), right? Well, it’s complicated. What can we look at to see if the unemployment rate is a best indicator? Consumer spending of course.
It makes sense the more we spend, the more comfortable we are with our economic prospects. Looking at the chart below from Trading Economics United States Consumer Spending | 1950-2021 Data | 2022-2023 Forecast | Historical (tradingeconomics.com), it is easy to see today’s consumer spending is as good as, or higher, than any period since 2018, including when the national unemployment rate was 3.5%.
This can be considered terrific news. Not only are we spending money like there is a 3.5% unemployment rate, but there is also more room for open jobs to be filled to further expand on already great numbers. Even the Fed saw the trend. In March 2021, the Federal Reserve raised its economic forecast for 2021 by more than 50% from its December estimate.
Now the reality check. I don’t normally take the pessimist path. It is too easy to do that. Being a pessimist is a sure thing. If I pessimistically forecast the economy will unravel, there will be another pandemic, and the world will come to an end, I will be right on all counts. The key here is I am leaving out ‘when’ those things will happen. Since I am not predicting when, my window of time those things can occur is forever, which is rather good odds.
Okay, I won’t be pessimistic. I will describe myself the way most pessimists do themselves, I am being a ‘realist’. It cannot be ignored foreclosures could be looming. While foreclosures in 2020 were comparatively low compared to prior years, no one really knows what foreclosure numbers will do after all moratoriums expire and the banks get around to wanting their money. Moreover, inflation could hamstring the red-hot home sales market if The Fed must raise interest rates to control the inflation. This could create real unemployment not induced by government stimulus money. While the concerns are real, most economists believe they are not likely to materialize in this quarter, or even the next quarter, but could be a factor by early 2022.
In meantime, many of the shorter term indicators are pointing north. Yep, just like the artsy thing by the St. Johns River in Jacksonville, FL pictured below. Well, it is pointing North symbolically, and ‘up’ if you want to be technical. Incidentally, The St John’s River also flows North as it flows by the artsy thing.
For U.S. importers, look for continued exceedingly high ocean container rates and fees through Fall. The same goes for domestic trucking. I have a difficult time conceiving a situation short of a catastrophe that capacity driven trucking rates don’t remain very strong throughout 2021. The trucking boom should result in strong rail rates throughout the same time period. If you are a shipper, do not plan on reasonable rates to budget and plan your next 12 months. If you are a cargo ground carrier, enjoy the ride and put away money for a rainy day. Unlike ocean container carriers, the trucking industry cannot simply take units out of service to control capacity. In trucking it is still done the old-fashioned way. Supply and demand dictate how many truckers will survive the next down turn; who socks away the most money now will dictate who they are.