Peoria chamber touting cargo stats as a sign to an improving economy
I got this in my inbox today, but I am skeptical of the conclusions:
Increased Cargo Movement Points to Stronger Economy
February 9, 2010 (Peoria, IL)—Freight is starting to move again and this is an indication that our economy is strengthening. According to Steve Jaeger with the Heart of Illinois Regional Port District (TransPORT), “The global recession had a massive impact on our economy and the transportation industry was hit tremendously hard, but we are starting to see some movement that is promising.”
Cargo statistics for October 2009 broke a 25 month string of year-to-year declines in movement of industrial and consumer goods. The August-November peak shipping period for holiday merchandise came in showing a 4.3 increase in freight volume over the same period in 2008. Forecasts show a 10% increase in 2010 for movement of finished goods and projections of a nearly 14% hike in the transportation of imported products year over year. Jaeger warns while this is good news, it does not mean an instant recovery for the transportation industry.
He says as cargo movement slowly recovers, the biggest problem for transportation providers is the depressed level of freight rates brought about by the recession. “Trucking companies in the Midwest region, as well as the ocean carriers that bring in the imports, continue to struggle with revenue levels that fall short of covering operating costs. Banks and other lenders to these firms are resisting calling in delinquent loans in hope that profitable operations are not far off. The trucking companies with terminals in Central Illinois have idled much of their equipment during the downturn but are beginning to see demand pick up.”
The healthiest players in the transportation sector, according to Jaeger, are the freight railroads, which have largely remained profitable even as their traffic levels fell off by 20 per cent or more in early 2009. He says, freight movement by rail is now on the uptick, and the decision by Warren Buffett’s Berkshire Hathaway firm to acquire the rail carrier BNSF was described by Mr. Buffett as “a wager on the future of the American economy, with freight movement as the bellwether of economic activity.” BNSF is overwhelmingly the largest employer in the Galesburg area and also serves Peoria.
My two cents: I dunno. When the economy is good or even mediocre, we don’t see press releases making ec0onomic predictions predictions based only on freight movement statistics. I don’t think we’ll see anything happen until banks start lending money again, and they won’t as long as they can make more money gouging consumers with fees.
Billy Dennis is a former reporter and editor at small daily and weekly newspapers in Illinois and Missouri. He comments on media, news and politics. He also owns and operates 
Transportation industries benefit from rising freight volume when shippers' existing facilities return to higher levels of production. As auto assembly plants have reopened following Chrysler and GM reorganizations, steel mills have returned to production (like U. S. Steel in Granite City). That means Minnesota taconite mines resume production. It's certainly not a complete recovery, but it helps transportation industries.
According to the Council of Economic Advisors, unemployment will remain at around 10 percent for the rest of this year and only decline gradually in 2011. We lost over 8 million jobs during the recession. Couple this with the fact that, due to population increases during the recession, an additional 2.5 million people have entered the workforce (or at least tried to enter the workforce) and the economy will need to create almost 11 million jobs just to get back to the pre-recession unemployment rate.
The only way the economy is going get out of the ditch is for the middle class to get to its feet. A good barometer for judging the demand for workers is hours of overtime. The more overtime, the more likely employers will soon have to break down and hire more full-time employees. But right now, the average workweek is only 33.2 hours, so there's a long ways to go.
We're nowhere close to being out of the woods, I'm afraid.
Evidently Warren Buffet believes in increased freight traffic because of his huge investment in BNSF this past year. I think I would follow his example. He has a proven track record.