With inflation declining, while not at a brisk enough pace, coupled with things like still-high inventory levels, solid job numbers and retail sales growth, and manufacturing on a downswing, it is fair to say that the current economic outlook is very mixed.
Those indicators—and others, like the housing market and the anticipated actions to be taken by the Federal Reserve—continue to leave things in an ongoing state of economic uncertainty.
That uncertainty has also been on display, in the form of the pairing of slowing consumer demand and import levels, going back to the middle of 2022 or so, to be sure. What happens next is anyone’s guess.
One thing, for certain, is that talk of a recession remains fully intact. But, to what degree, is where that conversation gets somewhat tricky, in terms of things like: when it is coming? For how long, or if it has already happened.
Doug Waggoner, CEO of Chicago-based Echo Global Logistics, recently told me it happening now, when I asked him about the potential for a recession in 2023.
“I have been saying for a couple of quarters now that there would be a recession, and I think we are probably already in it,” he said. “The technical definition of a recession is two sequential quarters of negative GDP, and that has already come and gone. But I think the argument is yes, but employment has been strong and the consumer has been strong, so is it really a recession? We are in a freight recession, but like I said earlier I consider 2023 one of those years you have to write off and fight through it and live to fight another day. But, in looking at weekly numbers, I am starting to get the feeling that maybe the worst is over and maybe we are going to see a pickup from here. It is impossible to predict the future in this business.”
I posed the same question to Gene Seroka, executive director of the Port of Los Angeles, on the port’s media call this week, and he said he does not see it happening, adding the current macroeconomic environment represents an equation that has not been previously seen.
He described the current economic environment as very unique based on the most recent batch of economic data, including the January inflation number, at 6.4%, not declining at the rate which was anticipated, whereas retail sales, for the month, climbed 3%, coming off of the holidays, as well as manufacturing orders rising 1%.
“We still have 11 million jobs open and the lowest unemployment since 1969,” he said, adding that while technology sector layoffs have been rampant, of late, “other sectors like supply chain and manufacturing are clamoring to get great people on board in a variety of skillsets.”
Seroka also made the case that many economic experts have been, in a sense, moving the goalposts back, when it comes to the timing of a recession, with some saying it would be in early 2022, then early 2023, and now the back end of this year, or even 2024, possibly.”
“With 70% of GDP, being [us] buying goods, I still see things remaining pretty strong,” he said. “A downturn may be shallow, or short-lived. By some, the definition may be recession. I just don’t see it in a traditional way, where it will hit the American family and jobs in a broad-based case. We will keep watching, this is not something we dismiss or are flippant about. But I like our chances, not just for here in Los Angeles for international trade, but also for the U.S. economy.”
Both Waggoner and Seroka make excellent points based on stats and sentiment, and those are two industry stakeholders that know this business more than most so I am inclined to agree. That said, things can change quickly in times like these so we will have to continue to closely monitor things, too.