Freight Forward: Labor Tensions Increasing

Welcome to Freight Forward, where each Monday, I’ll recap what happened in supply chains the previous week through?JOC.com?articles and additional sources and also what to expect for the week ahead.

Just in case you’re wondering, I’m Cathy Roberson, a supply chain writer, and researcher. For this weekly series, I serve as a research analyst for the Journal of Commerce (JOC), for whom I identify trends, provide thoughts and input into stories and assist with parcel last-mile queries.

Strong retail imports are expected through November although volumes are forecasted to be down slightly from the record cargo that moved through the country’s ports last year. “The year-over-year declines during the second half of the year contrast with unusually high numbers during the same period in 2021, but volumes remain high, and the full year is still expected to see a net increase over 2021,” the National Retail Federation (NRF) and Hackett Associates said in their July Global Port Tracker.

Indeed, volumes were high for the first five months of the year, rising 3% according to PIERS, a sister product of JOC.com within IHS Markit, now part of S&P Global. That growth has been uneven, however, as a bustling trans-Atlantic trade and shippers diverting cargo away from the West Coast pushed volumes through the East and Gulf coasts up 6.1% and 21.3%, respectively, while West Coast imports slipped 3.5%.

“We’re handling a full 33% more containers through our terminals than we were in the same period in 2019,” Bethann Rooney, port director at the Port Authority of New York and New Jersey (PANYNJ), said during a July 1 media briefing.

Griff Lynch, CEO of the Georgia Port Authority (GPA), said higher-than-expected import volumes will likely exacerbate the vessel backlog in the coming months. According to GPA forecasts, there are roughly 255,000 containers “on the water” headed for Savannah, up from 210,000 last fall, the last time there were so many ships waiting to berth, and 170,000 in January 2021.

“Even as recently as a month ago, we never envisioned the amount of volume that is en route to Savannah,” Lynch told JOC.com in a June 30 interview.

Port officials and terminal operators across the country have attributed the chronic congestion and resulting vessel backlogs primarily to longer dwell times for import boxes caused by bottlenecks at packed warehouses and inland rail ramps.

In addition, many importers have been shipping back-to-school and even holiday goods months ahead of the typical August–October peak season to avoid congestion and mitigate the risk of further disruption on the West Coast stemming from ongoing longshore labor contract negotiations.

While ocean freight volumes increase, global air cargo volumes declined 8% in June. However, according to Thomas Mack, global head of air freight for DHL Global Forwarding, despite passenger travel adding belly cargo capacity back into the market, especially on the trans-Atlantic, there remains an overall shortage of space. “We continue to see very high demand for main deck capacity, not only on the trans-Atlantic, but globally,” Mack told JOC.com.

However, Niall van de Wouw, chief air freight officer at Xeneta notes that ?“while flights ex-Asia to the US and Europe remain relatively full, we are seeing a subdued North Atlantic [rate] market, largely due to more capacity.”

“General North Atlantic air freight rates dropped by around 30 percent between the first week of April to the last week of June,” de Wouw added. “This brings these rates very close to the 2020 levels.”

Meanwhile, a look at the US inland transportation finds that less-than-truckload (LTL) is receiving quite the attention in terms of investments and services. ?

“For the next several years, LTL is going to be the most valuable combination of letters in the US ground transportation alphabet,” Tom Schmitt, chairman and CEO of Forward Air, told JOC.com at the SMC3 Connections 2022 conference in San Diego. That’s because LTL can deliver smaller shipments with a precision that is lacking in other modes, outside parcel, Schmitt said.

Port cities continue to be a focus but there’s a shift in freight traffic according to Rob Estes, president and CEO of Estes Express Lines, “We’ve seen a shift in freight traffic around port cities, especially on the East Coast,” Estes said during an SMC3 panel discussion. “These were consumer-oriented markets, and we used to price freight going into a port as a headhaul. Now that’s reversed. Savannah, Charleston, and Elizabeth, New Jersey are all mega-outbound ports for us now.”

Estes is building or expanding facilities near seaports to capture more containerized freight; the Richmond, Virginia-based carrier in May opened a 90-door Savannah terminal. “In Savannah, we feel we can balance the state of Florida, with empties coming out of Florida into Savannah, and moving freight we load there to the rest of the Southeast and Midwest,” Estes said.

The goal for many LTL carriers is to capture imports, deconsolidate them, and bring them into their networks as they arrive, rather than several hundred miles inland after goods have been railed or trucked to warehouses or distribution centers. Those transloaded shipments may represent a small portion of their overall freight mix, but it’s a fast-growing portion they expect to keep.

Demand for LTL services is coming as trucking employment grows. For-hire carriers tracked by the US Bureau of Labor Statistics (BLS) added 20,600 jobs in June, following May’s gain of 25,800, which was adjusted upward by the BLS Friday.

In the past three months, trucking companies have added a record 62,400 workers to their payrolls, compared with 31,400 in the same period last year and 37,800 employees added from April through June 2020, when trucking began to bounce back from severe job losses during the early days of the pandemic. In 2018, the strongest year for trucking before 2021, the equivalent gain was 33,800 jobs.

“We have seen massive payroll gains this year in trucking, especially in the last three months,” Jason Miller, associate professor of logistics at Michigan State University, told JOC.com Friday. “Based on job openings data, I see these figures only going higher for the transportation and warehousing sector.” The wild card, he said, is that some of the gains may be formerly self-employed drivers becoming employees.

Warehousing and storage employment also had a strong month in June, increasing 1.0% from May and 11.1% from June 2021.

As supply chain employment appears to be growing overall, labor contracts across all modes of transportation are under review. The most visible, of course, remains the ILWU and PMA negotiations.

In mid-June, the National Mediation Board implemented a “cooling off period” for railroad unions and Class I carriers after talks failed. As such, The NRF sent a letter urging President Biden to seek arbitration via a Presidential Emergency Board.

The 13 rail unions, representing approximately 140,000 railroad workers in the US, want higher wages and have complained of tough work conditions as the rail industry struggles to attract workers.

A number of airlines are also negotiating with pilot unions. Exacerbating the situation is an ongoing pilot shortage. A pilot shortage was underway before 2020 and further worsened as training schools were canceled during the pandemic. According to the US Bureau of Labor Statistics, the number of pilots and flight engineers employed has declined 2.5% from 2019 to 2021.

While tentative agreements have been reached with American Airlines and UPS, FedEx has yet to reach an agreement with its pilots as the two parties continue negotiations that have been ongoing for over thirteen months.

Indeed, rising global inflation and COVID-19 lockdowns have made unionized labor within containerized supply chains ripe for industrial action in Europe and the US. ?

Economic Outlook

• Wednesday, July 13 – June CPI – Expectation of a slight increase in monthly CPI compared to May’s 1.0%.
• Thursday, July 14 – June PPI – MarketWatch expects June PPI to remain unchanged from May’s 0.8%.
• Friday, July 15 – June Retail Sales – After a decline in May, expectations are that consumers took advantage of retailers’ excess inventory which will result in an increase in overall retail sales for the month.
• Friday, July 15 – June Industrial Production – No change from May’s 0.1% is expected.
• Friday, July 15 – May Business Inventories – No change from April’s 1.2% increase is expected.

That’s it for this week. Please be sure to hit the subscribe button to receive the latest updates.

What did I miss? Have a question? Let me know in the comments. I’ll be checking back throughout the week to answer questions, address comments and share additional insights.

In the meantime, here’s hoping everyone has a good freight week ahead!

-Cathy