Larkin said that a combination of accelerating economic growth between now and 2018 could be coupled with further capacity constraints imposed by the federal government to create market conditions that could eventually constrain the U.S. economy.
“If carriers can provide sufficient capacity, the future looks very bright, provided the U.S. government can get out of the way and let us do our jobs,” he said.
He estimated that freight rates overall will rise around 3% to 5%.
During his remarks, he mentioned multiple federal actions that could hurt productivity, including upcoming regulations to mandate electronic logging devices and the inability of Congress, at least so far, to allow larger and heavier trucks that could help to address tight capacity.
Larkin outlined an economic scenario that could lead to faster economic growth, while also noting that the U.S. job market still is lackluster, with too many part-time workers and a shortfall of 2 million people to fill what he termed “blue-collar” jobs. Trucking was included in that group.
On the positive side, Larkin said the auto industry has rebounded strongly and should continue to do well because the average age of cars and light trucks is at a 13-year high. Retail inventories also remain low and could require significant replenishment, in part because of supply chain disruptions tied to slowdowns at West Coast ports during contract talks.
“This could be the year that the economy breaks out of the slow-growth trends,” he said.
On the other hand, he noted that growth as reflected in the closely watched Institute of Supply Management’s index slowed in February and has not moved up consistently since the end of the recession. Housing also hasn’t recovered as much as manufacturing, he said, and construction has done even worse.
A shortage of workers to fill skilled jobs isn’t confined to trucking, Larkin said, noting that coal mines, factories and others are pressing to find new workers.
Current economic conditions, which are being affected by lower oil prices, will continue for somewhere between six to 18 months while existing wells that are producing diesel and gasoline are in operation. When those existing wells can’t produce anymore, Larkin said he believes oil prices will return to the $80- to $100-per-barrel range. Diesel prices haven’t fallen as much as gasoline because of refinery constraints, he added.
Larkin also noted that trucking is going to be affected by changes in the years ahead, such as Amazon’s push for faster deliveries, the movement of some businesses to Mexico from Asia and the advent of 3D manufacturing that will bring some production closer to the end user instead of moving those goods thousands of miles from low-cost overseas production sites.