Trucking Impact on Employment

Employment related to trucking can be divided between those employed by for-hire trucking companies and companies engaged in private trucking. For-hire trucking companies are those whose core business transporting goods for a fee. Private fleets are those operated by companies whose core business is some other activity even though trucking represents a portion of the business.

The for-hire segment hired 18,575 workers in 2003. Graph 1 shows that since late-2001, trucking employment in Louisiana has contracted by about 8.5% due to the downturn in overall freight traffic that began around mid-2000. This decline is more pronounced compared to the national average, which remains down by a smaller 5%. Also, while national for-hire trucking employment has improved since mid-2003, Louisiana’s trucking employment has remained relatively flat during this period.

Similarly, back in 1990-1992, employment in the for-hire also fell faster in Louisiana but grew more rapidly during the rest of the 1990s. This suggests that Louisiana’s for-hire segment is generally more cyclical than the nation as a whole.

The number of employees that are involved in private trucking in Louisiana greatly outnumber those that are involved in for-hire trucking. These employees include all of the personnel that are involved in the transportation of goods for a company whose core business is some other activity. Grocery stores, furniture stores, and farms are a few of the numerous businesses that carry out some trucking. The number of employees in this private trucking activity is harder to assess, but it is estimated to be somewhere in the neighborhood of 100,000 people.

Establishments & Revenue

A number of sources can be used to assess the total revenue of trucking firms in Louisiana. The 1997 Economic Census is useful to gauge the revenue of for-hire truck establishments. The for-hire truck transportation segment encompassed 8,167 establishments in 1997. These establishments produced about $2.06 billion in revenue, which represents about 24.5% of all 1997 transportation and warehouse revenue. The average annual wages paid by these establishments in 1997 was about $25,500. In addition, other sources of data, namely the Census Bureau’s Statistic of U.S. Businesses and Nonemployer Statistics, indicate that for-hire truck transportation establishments grew by about 9% to 8,917 from 1997 to 2001.

If privately operated trucks were to be added, then trucking industry in Louisiana would account for substantially higher revenue. Using an assumption that freight rates between private and for-hire companies are approximately equal, it is estimated that total industry revenues in Louisiana amount to $7.83 billion in 2003.

Gross State Product

Trucking and warehouse contributed $1.689 billion or 1.1% to Gross State Product (GSP) in 2001 (latest available data). Compared to other transportation modes, only transportation by water added more to Louisiana GSP than trucking and warehouse. Once again, this estimate greatly underestimates the contribution of trucking to GSP, as it excludes privately operated carriers.

Demographics of Louisiana’s Trucking Industry

The 1997 Vehicle Inventory and Use Survey provides some insight into the size and the composition of the trucking industry in Louisiana. There were approximately 55,147 class 3-8 trucks in 1997, accounting for 1.1% of all U.S. trucks. In the midrange category (classes 3-5), there were approximately 7,871 trucks in 1997. The medium-duty category (classes 6-7) amounted to 21,920 trucks, and heavy-duty trucks summed to 25,356 in 1997 representing about 46% of the total.

Chart 3 shows the truck distribution by major use of the vehicle. The data show that agriculture, construction, wholesale trade, retail, and for-hire captured over 60% of classes 3-8 trucks in Louisiana. While for-hire and agriculture accounted for a substantial fraction of all Louisiana 3-8 trucks, their shares are comparatively smaller to those for the nation as a whole.

The distribution by major use changes somewhat when trucks are classified into classes. It is important to look at the distribution by truck classification to better understand the impact of trucking on the state economy or alternatively Louisiana economic performance impact on overall freight volumes.

It is not surprisingly that for-hire vehicles concentrate in the heavy-duty category. It is somewhat surprising, however, that the share of heavy-duty trucks in construction is slightly higher to that of for-hire. This is unusual because, for the nation as a whole, for-hire clearly overpowers other sectors with a 32% heavy-duty truck share. In classes 3 to 7 trucks, wholesale and retail trade captures a high fraction with a 27.6% share in midrange and 31.4% in medium-duty.

Freight Movements

The 1997 Commodity Flow Survey (CFS) produced by the Census is an instructive source for discerning freight volumes in Louisiana.

In Chart 4, the CFS reveals that trucks carried 148,037,000 tons or 29% of all freight tonnage shipped in Louisiana during 1997. Louisiana’s truck tonnage share is much smaller compared to the U.S.’s 69% share. Transportation by pipeline and water in Louisiana are significantly higher compared to the almost 11% tonnage share both of these modes combined signify for the nation. In the state, for-hire trucks carried 12% of all 1997 freight tonnage while private carriers moved the remaining 17%.

In terms of dollar value, trucks moved over $53.17 billion worth of merchandise or 44% of the 1997 total dollar value shipped in Louisiana. While greater than the truck tonnage share, this dollar value fraction is again smaller than the 72% truck share for the nation. For-hire trucks carried the greatest share of in terms of dollar value, accounting for $27.24 billion.

The Louisiana Economy

The Louisiana economy is recovering although it seems to be lagging the nation as a whole. After showing signs of stabilizing, the Louisiana economy has failed to realize significant improvement in recent months. As shown in Graph 3, employment in the state has actually declined in the past two reported months and stands below its cyclical low reached in March 2002. In recent months, significant job losses have occurred in manufacturing and the service sector. Chemical manufacturing employment has been particularly impacted by high prices of inputs and weak demand, which has forced plants closures and slowdowns. Overall national employment, in contrast, has improved moderately during the past five consecutive months.

Activity in most real estate markets has also been sluggish. In 2003, Louisiana existing home sales were similar to 2002 and new home sales increased moderately. Construction employment posted modest improvement during most of 2003 after declining in 2002. On the positive side, Graph 4 shows that residential building permits surged during the second and third quarters of 2003 and although permits have slowed some afterwards, this surge has resulted in higher construction employment recently. In addition, the state’s nonresidential market is likely to see slight improvements in 2004.

Also positive is that consumer confidence in the West South Central region has improved in recent months. This advance along with healthy increases in Louisiana personal income suggests sustained consumer spending in the near future. High oil and gas prices may benefit employment in the still dominant oil industry, as jobs in this sector usually rise when oil prices exceed mid-20 dollar per barrel. The very important hospitality sector, which accounts for more than one in ten jobs in Louisiana, is likely to pick up moderately in coming months in line with overall gains in the economy.

Most economic data points to modest improvements in coming months but growth in Louisiana may continue to lag much of the nation.

The Louisiana Freight Traffic

According to our estimates, Louisiana freight traffic began to fall in mid-2000, and it remains down by about 2.5% from this peak. Graph 5 shows that traffic in Louisiana resumed at the beginning of 2002, was flat from mid-2002 to mid-2003, and increased again afterwards. In recent months, sectors that have benefited Louisiana freight traffic to greater extent are gains in wood product, chemicals, machinery, and petroleum products manufacturing. Due to these recent increases, Louisiana freight traffic growth has slightly surpassed the U.S. as a whole.

The outlook for Louisiana freight traffic is positive in the near term. As discussed in the previous section, residential construction, which is a significant sector for trucking in the state, remains healthy and may be actually increasing according to permits data. High oil prices may cause drilling activity to improve some during 2004 in the important oil industry. Also, while the chemical industry has been hurt by these same high prices, chemical production will likely receive a boost as national industrial activity accelerates in the next few months. This is particularly true considering that chemical producers have trimmed down their inventories to very low levels. Improved business investment conditions will also benefit machinery production, and improved economic conditions across the nation will likely positively impact freight related to the state’s leisure and hospitality industry.

As economic conditions continue to recover, Louisiana may continue to grow ahead of the nation in the next few months. Given that construction is relatively more significant to Louisiana’s freight, growth will likely moderate a bit later in the year as residential construction slowdowns due to higher mortgage rates.