Many logistics providers used the recession as an opportunity to make operational changes to become more nimble and lean. These companies are well-positioned for 2010.

"Logistics providers were among the first to feel the effects of the economic downturn", said Vince Hartnett, President, Penske Logistics. "Today, we are seeing some positive signs of recovery in the supply chain with increasing truck freight volumes and higher truck fleet utilization rates. If this continues, trucking and logistics firms will likely add capacity to take on additional loads and hire drivers to meet increasing demand."

"Anecdotally, we are also seeing more Fortune 1000 level companies evaluating logistics outsourcing compared with the previous 12-month period," Hartnett continued. "This tells us that business leaders are looking to capture emerging growth opportunities while still staying focused on cash and capital - a good combination for our industry and a steady recovery."

However, the broader U.S. economy continues to struggle.

A survey released July 28 by the Federal Reserve showed that retailers reported sales gains, although merchants in some regions said shoppers focused on buying necessities. Sales of big-ticket merchandise were slower. The survey said that the housing market turned more sluggish after home-buyer tax credits expired in April, and that commercial real estate businesses continue to struggle across all regions of the country.

A few weeks ago the Commerce Department reported that orders to U.S. factories for big-ticket manufactured goods dropped 1 percent in June, the second straight monthly decline and the largest drop since August 2009. This is of some concern because manufacturing helped drive growth during the early stages of the economic recovery. A slowdown in manufacturing orders could be a sign that the struggling economy is losing strength.

When Will It End?

By now you’ve got to be wondering – are we getting closer to the end or just further from the beginning? To some extent the answer may depend on your perspective. For those who have been out of work for months and are still looking for a job, the end does not appear to be in sight. On the other hand major corporations recently posted huge profits. According to Market Watch, the huge profit increases coincided with a slight drop in first-time unemployment figures from the Labor Department – producing a glimmer of hope.

Still, many people continue to suffer. Even with businesses now making more money, very little is going towards adding jobs. The Washington Post reported recently that nonfinancial companies are sitting on $1.8 trillion but won’t add personnel in part because they’re waiting for consumer demand to pick up, which isn’t happening because some 15 million Americans are looking for jobs (Labor Department July figures) and many more are afraid of losing theirs. There may also be some concern and possible confusion over the impact of new business regulations, cost of the new health care law, higher federal taxes, and the inability to get adequate financing.

U.S. productivity, however, weathered the recession quite well, growing 2.5 percent (in per hour terms) last year, according to The Conference Board report dated Jan. 21, 2010. This increase in productivity was largely explained by dramatically reduced working hours that offset output (employment fell by 3.6 percent in 2009; hours worked per worker fell by 1.5 percent) as U.S. companies continue to find ways to do more with less. However, after five quarters of strong productivity growth, business sector labor productivity decreased at a 0.9 percent annual rate during the second quarter of 2010, as reported by the U.S. Bureau of Labor Statistics yesterday, August 10, 2010.

This is a good news/bad news scenario because while companies become more “lean”, there’s another reason for the lack of hiring - companies have found they can make do with a lot fewer workers. The recession has been a way to reduce wages and to discover that many jobs don’t have to be filled again, either because they can get more out of current employees thru the deployment of new methods and technologies such as LMS (see – “Diagnosing the Savings from Labor Management Systems”) or because the jobs have been outsourced. A potential silver lining in yesterday’s productivity report is the possibility it may force more hiring by employers if they have reached the limits of squeezing current workforces.

Whose Fault Is It?

It's fair to say that failed government policies, enacted by politicians on both sides of the aisle, lead to the economic mess we are now experiencing. At the same time, the excesses and extremes of corporate America certainly contributed to our current problems. In that regard one has to wonder if the current corporate commitment to remain lean is turning the worker-surplus issue from a personal crisis for many American families into a systemic one for the country’s economy.

The hard truth about the U.S. economy is that businesses don’t need as many of us as workers but still need us as consumers. Still, employers might be willing to hire more if consumer spending was doing better. But then maybe consumer spending won’t start doing better until employers start hiring. That dilemma helps explain why unemployment remains at 9.5 percent, the underemployment rate is near 17%, and why the economic recovery is feared to be stumbling towards a double dip.

With consumer spending accounting for two-thirds of economic activity, anything that further rattles consumers can undercut recovery hopes. American households have already lost $14 trillion in wealth and according to a new analysis conducted by The Rockefeller Foundation and Yale University, American households are in the most precarious financial situation in a quarter of a century. And, don’t count on the “boomers” for relief - there is no reason to think that millions of “boomers” who are going to retire over the next 10 years will do anything but keep saving, not spending.

What Might Turn the Economy Around?

Answers to this question, of course, can have all sorts of political ramifications. However, the following are three possible scenarios offered by some independent economists:

1. More government spending is one possible solution. Perhaps this week’s $26B bill to bailout states that plan to lay off teachers and other public workers will help, but, government spending (bailouts) carries a risk of government becoming an even larger percentage of the economy.
2. Business begins to invest some of their recent gains on capital projects to update operations, increase throughput capacity, etc.
3. America changes its role in the global economy from a net importer to a net exporter.

The challenge to either of the last two scenarios is that there does not appear to be any government policies presently in place to promote business investment and growth (especially for SMBs) or a pro-trade agenda - other than the one we have with China which has a rapidly expanding economy.

Nevertheless, Fed Chairman Ben Bernanke and his colleagues still have a few tricks up their sleeves. They recently told congress that the Fed is prepared to take new steps to stimulate economic growth if recovery were to actually flash signs of sliding back into recession. Yesterday, the Fed said that it intends to keep overnight rates at their low levels for an extended period to aid the struggling economy.

At the same time, while there is little evidence of the inflation that could come with such easy money there is nevertheless the underlying fear that the loose monetary policy is laying the groundwork for inflation.

With the U.S. National Debt at $13 Trillion and increasing an average of $4.08 Billion per day, there is more than enough reason for concern. Still, our elected representatives seem to be fully engaged in the sport of political finger-pointing, which no matter how entertaining it may be, will not create jobs, nor will it produce a solution to the foreclosure crises.

Final Thoughts

High unemployment, cautious consumers and businesses, an ailing housing market and an edgy Wall Street have, in spite of historical low interest rates and a huge stimulus package, kept the recovery from gaining strength. Still, indicators show improvements in the fourth quarter of this year.

Although time will tell how the logistics sector deals with the recovery, those companies that capitalize on the recovery as it occurs, such as restructuring their distribution networks to maximize efficiency and minimize loses, investing in technologies that improve real-time data flows to increase visibility and enhance productivity, will be among the top performers going forward.

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