Robust GDP growth masks weak supply chain sector

The United States economic figures underscore a modestly growing economy with sustained job growth. Although jobless claims in the country climbed by 11,000 to 276,000 in late March compared to consensus estimates of 268,000, hiring, according to government stats, should remain healthy for some time as it has been for the past five years.

While the numbers are not especially robust, the U.S. economy continues to grow as well. Most recently, gross domestic product (GDP) figures were revised higher than previously estimated for the Q4 to 1.4 per cent, while other key economic data point up a U.S. economy that is more likely than not on a growth track.

However, for supply chain-related segments of the economy, including transportation and manufacturing, all is not so rosy. In February, for example, the goods transportation industry continued to shed jobs, according to the U.S. Department of Labour statistics. The job losses have prompted some economists to speculate that the U.S.' goods production and transport industry continue to shrink while growth in demand for low-wage service workers accounted for much of the strong recently reported job numbers.

GDP numbers and supply chain health incongruence

The discrepancy between positive GDP numbers versus tepid transportation and manufacturing activity can be explained by how official economic indicators no longer accurately gauge the health of supply chain-related sectors as well as they previously did, stated Jock O'Connell, an international trade economist for Beacon Economics.

"There is a diminishing usefulness of GDP as a variable in forecasting freight volumes, for example," O'Connell said.

For some economists, the U.S. as a two-tier track economy is becoming more pronounced. There is the top one per cent of the U.S. population that accounts for a growing part of the country's wealth, for example, reflecting demand for services and goods that are less manufacturing and transportation-dependent.

"What we are seeing is inadequately paying jobs being created," O'Connell said. "That will eventually impact our import trade, in that how many pairs of shoes can the one per cent buy?"

Much of the economic figures in the U.S. also reflect a sizeable percentage of corporate profits that account for official economic growth, yet remain offshore and are not invested in the U.S. economy.

"We are seeing growing GDP accruing for wealthy families as well as for large corporations that for a variety of reasons have decided to hang on to large volumes of cash, a large percentage of which they have parked offshore somewhere," O'Connell said.

This two-track economy is often reflected in very tangible statistics. "Previously, three per cent growth in GDP might mean a four per cent increase in container shipping traffic," O'Connell said. "But that assumption is making less and less sense as time moves on because if most of the GDP growth accrues to a smaller and smaller segment of the population."

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