Escape from AB5: California trucker protests strike Los Angeles
California truckers staged a citywide protest and work stoppage in the Los Angeles area on Wednesday. Local news affiliates reported affected areas included blocked traffic around the Ports of Long Beach and LA and along parts of the 110 Freeway in and around Carson, California. This comes after the U.S. Supreme Court refused to hear the California Trucking Association’s challenge to state assembly bill 5 (AB5), which seeks to limit the scope and use of independent contractors, arguing that they should instead be classified as employee drivers. This left in place the decision by the 9th U.S. Circuit Court of Appeals, which ruled that the AB5 bill may go into effect.
The protests stem from the potential impact this law will have on the over 70,000 owner-operators who operate in California. Some argue that the Commerce clause, part of Article 1 of the U.S. Constitution, may offer protection, as the CTA and Owner-Operator Independent Drivers Association argue AB5 may be a constitutional violation.
Southern California is no stranger to traffic but rarely is it the result of trucks purposefully blocking multiple lanes of travel. Frequently from an operational standpoint, moving across stretches of Los Angeles proper inward to the Inland Empire regions can often take hours due to traffic congestion as well as the statewide speed limit of 55 mph for commercial vehicles.
What remains to be seen is the impact of enforcement of this measure and if owner-operators and trucking companies continue to disrupt commercial operations. Ravi Shanker, with the transportation research team at Morgan Stanley, wrote in a recent report: “While AB5 is likely to restrict capacity in the state, there could be some delay between the rule’s implementation and actual enforcement. Smaller carriers and brokers are less likely to have the same robust processes. However, they do have the benefit of being more ‘under the radar’ than larger peers and therefore a less likely target for initial enforcement.”
Rail union approves possible Monday strike by a vote of 99.5%
Members of the Brotherhood of Locomotive Engineers and Trainmen approved measures authorizing a strike as early as Monday. The union represents over 57,000 U.S. railroad employees, and the measures gained 99.5% approval in a vote. This comes during the 30-day cooling-off period mandated under the Railway Labor Act after both sides failed to reach an agreement before the National Mediation Board. The union, as reported by the Fort Worth Star-Telegram, “is one of 13 rail worker unions negotiating a national labor contract after the previous contract expired in 2019.”
Depending on whom you ask, the Railway Labor Act helps both sides mediate and avoid strikes or is used as a way to deny collective bargaining and curtail the ability of railroad workers to exercise their rights. Railroad strikes are not a new phenomenon, as before the passage of the RLA in 1926 there were the Great Railway Strike of 1877 and the Pullman Strike of 1894.
The union argues that the pandemic and the focus on profits by Class I rail carriers caused them to fire or furlough a third of their nationwide workforce while making the remaining employees work longer hours. This caused longer-running trains and led to infrastructure shutdowns due to the rail network not being designed to handle the longer trains. As the post-pandemic recovery began, the rail carriers failed to adequately staff their operations, according to the union, and implemented attendance policies that failed to provide engineers scheduled time off.
On the other side of the equation, publicly traded Class I railroads face increasing pressure from investors to improve profitability and operating ratios. A major development in this trend is precision scheduled railroading (PSR) and its resulting impact on railroad service levels. PSR practices were put in place well before the pandemic, according to the Transportation Trades Department (TTD) of the AFL-CIO. Estimates from the TTD state that “in the five years prior to the pandemic, BNSF cut its train and engine workforce by 27%, while Norfolk Southern (NYSE: NSC) reduced its train and engine workforce by up to 32%, and CSX (NASDAQ: CSX) slashed its train and engine headcount by 43%.”
PSR resulted in greater profits but less equipment and availability of replacement rail crews, which before the pandemic disruptions represented a fragile equilibrium. A next step to watch for will be if the Biden administration moves to prevent the strike by appointing a three-member emergency board to investigate the dispute and make recommendations.
Market update: Consumer Price Index inflation up 9.1% year-over-year
In economic news the Consumer Price Index increased 1.3% in June after rising 1% in May. Over the past year, the index increased 9.1% not seasonally adjusted.
As shown in the above chart, energy prices continue to serve as a leading driver for this inflationary pressure, putting greater pressure on both consumers and manufacturers, who are seeing higher costs. According to the news release, this is the largest increase since November 1981, with the energy index rising 41.6% from the past year, the largest increase since 1980.
With inflation at its highest level in 41 years, Robert Frick, corporate economist at Navy Federal Credit Union, noted: “CPI delivered another shock, and as painful as June’s higher number is, equally as bad is the broadening sources of inflation. Though CPI’s spike is led by energy and food prices, which are largely global problems, prices continue to mount for domestic goods and services, from shelter to autos to apparel.”
FreightWaves’ TRAC lane spotlight: Van Outbound Tender Volumes
Commentary courtesy of SONAR Sightings:
Summary: Spot rates continue to fall despite rising outbound load tender volumes.
Highlights:
- Van volumes are growing in Pennsylvania, Chicago and the Southeast on a two-week basis.
- Although the June jobs report vastly outperformed economists’ consensus, recent metrics from the Institute of Supply Management point to labor contraction in the manufacturing sector. Any potential layoffs could affect future truckload volumes from hub regions like the Rust Belt.
- King tides are coming to California’s Bay Area this week and are expected to cause a degree of coastal flooding in the region. Potential damage could be done to the local highways and interchanges, while low tides in the mornings might make navigation along the shallow waterways more difficult.
The Routing Guide: Links from around the web
Long Beach container backlog crosses red line as delays mount (FreightWaves)
Industrial outdoor storage garners more attention, investment (FreightWaves)
FMCSA commenters debate whether load boards should register as brokers (FreightWaves)
Long-Haul Truck Idling Burns Up Profits (U.S. Department of Energy)
