While watching the latest Democratic presidential debate, it occurred to me that both political parties are missing a critical issue when it comes to job creation.
On the Democratic side, Elizabeth Warren and Bernie Sanders proposed expensive government spending programs for healthcare and regulation. Yet there is no evidence that such programs will drive job growth. On the Republican side, President Trump has talked of bringing back steel. A recent tweet asserts that “Our Steel Industry is the talk of the World. It has been given new life and is thriving. Billions of Dollars is being spent on new plants all around the country!”
In fact, both sides are wrong.
According to a Commerce Department report, citing data from the World Steel Association, U.S. steel production in 2018 increased to 86.6 million metric tons from 81.6 million mt the previous year, an 11.4% rise. However, the data for 2019 has been less impressive. U.S. steel production decreased by 5.3% to 7.2 million mt in June, 2019, down from 7.7 million mt in May. This marks only a 2.6% increase from the June, 2018 production level.
U.S. Steel announced in June that it was idling a blast furnace at its biggest facility in Gary, Indiana, and another at its plant in Ecorse, Michigan, because "market conditions have softened." The Wall Street Journal reported that a trio of leading steelmakers reported weaker-than-expected demand and reduced profit expectations in Q2. Although Trump’s 25-percent tariffs on foreign steel provided temporary relief, that bubble appears to have burst. According to the Journal, the protective tariffs "allowed domestic producers to raise prices, but falling demand for steel has blunted the benefit of the tariff in recent months." That means lost jobs in those plants.
As this analysis reflects, steel jobs as a whole have been dropping off for the last 30 years. A recent Bloomberg article notes that ferrous metal foundry jobs have declined by 60% since 1990.
Where have the jobs gone? In a word: logistics. Warehousing and storage jobs have skyrocketed 180% over the same time period.
The U.S. Bureau of Labor Statistics (BLS) shows a healthy growth rate in logistician jobs over the past decade, with 174,900 positions filled in 2018. A 5% increase is projected between 2018 and 2028, keeping pace with the national average. Median salary is $74,600 and the average hourly rate is $35.86. Not spectacular numbers, but solid.
But the steady growth in demand for logisticians is just the tip of the iceberg when it comes to the impact of logistics on the economy as a whole. It creates employment for road, sea and air freight, all big generators of new jobs. There are more than 1.7 million heavy-duty and tractor-trailer truck-driving jobs today, according to BLS. Overall, 7.8 million Americans had jobs tied to the trucking industry in 2018, including 3.5 million professional drivers. Transportation and transportation-related industries employ over 13.3 million people, accounting for 9.1 percent of all U.S. workers.
The American Trucking Associations’ 2019 Trends report showed that 2018 was a “boom” year for trucking, which registered a stunning 12.8% increase in revenues, rising from $700.1 billion in 2017 to $796.7 billion last year. Trucks also moved 67.4% of surface freight between the U.S. and Canada — up 3.6% in 2018 — and accounted for 83.5% of cross-border trade with Mexico, up 10.2% from the previous year. In terms of diversity, 40.4% of truckers are minorities and 6.6% are women. “Truck driver” is considered the dominant profession in 29 U.S. states. Reminder to presidential candidates: these are voters and tax dollars.
The projected increase in jobs and their economic impact is also impressive given the rapid pace of automation in logistics, transport and related fields. Factory automation, the application of blockchain technology, the use of drones and self-driving vehicles, the deployment of software bots: these might be expected to take jobs, but that hasn’t been the big-picture result.
The generally bullish picture is punctuated by some remarkable transformation stories.
One case in point is Sparrows Point, Maryland. As the Bloomberg article illustrates, the Baltimore-based epicenter of the steel industry once boasted the world’s biggest steel mill, along with a shipyard, spread across 3,100 acres. When its owner, RG Steel, filed for bankruptcy, Sparrows Point became an industrial wasteland, littered with scrap metal, discarded machinery, and toxins. It became a living metaphor — or rather, a dying one — for the decay of American industrialism.
But then something unexpected happened. Hilco Global bought the site and transformed its focus. The new emphasis? Logistics.
Today, Sparrows Point is home to the warehousing and e-commerce fulfillment locations of a host of major companies. Amazon, Under Armour, FedEx, Volkswagen, Harley-Davidson, and others have set up shop. Sparrows Point is expected to generate 17,000 jobs.
As Sparrows Point reflects, traditional logistics has driven job growth over the last 30 years. Going forward, we will also see the rise in new jobs created by logistics technology.
And with good reason. There are at least 28 unicorns in logistics today. They include:
- Passenger transportation (Uber, Lyft, Didi Chuxing),
- Last-mile delivery (DoorDash, Postmates, InstaCart),
- Enterprise software (Infor),
- Global freight forwarding (Flexport),
- Food logistics (ezCater, iFood),
- Fleet management (KeepTruckin),
- Drones (Zipline), and
- Digital freight (Convoy).
As a result, job creation in this field is skyrocketing. For instance, Uber has hired over 19,000 employees, in addition to over 3 million drivers worldwide! More recently, Flexport has hired close to 1,700 employees in digital freight forwarding, as its LinkedIn page reflects. Logistics technology companies will continue to attract capital and create jobs.
The lesson is that logistics is booming, and is one of the most important engines of growth in our economy. Warehousing alone employs 1.4 million Americans today and continues to expand.
As the U.S. economy continues to shift from manufacturing to services, where will the jobs go? If we want to adapt to the 21st century economy, we should do more to train our nation’s workforce in logistics and related fields. That’s where the growth is.
Both President Trump and his Democratic challengers can contribute to American competitiveness and job creation — not by adding more layers of regulation or refighting the last century’s battles about steel. Rather, they should be focusing on the 21st-century jobs juggernaut that is logistics and transport.