Photography by Frederick Manfred Simon © www.steelwheels.photography
Inside This Issue
· Market Madness: Job Growth Still Brisk but Recession Still a Risk
· Houston Rockets: UP Follows BNSF in Launching New Intermodal Offerings
· Reefer Fever: CPKC Adding More Refrigerated Containers
· UP Succession Question: After Fritz Quits, Who Will Come Next?
· Lance’s Last Stand: Lame Duck Fritz Presents to Investors as Succession Looms
· Joe Blow: CSX’s Hinrichs Says Critical Chemicals Business Still “Soft”
· Tale of Two Constructions: Residential Slumping, Non-Res Booming
· Pricing on the Cake: UP and CSX Say RPU Trends Still Strong
· The Great Box Bust: Container Shipping Cheaper Now Than it Was Pre-Covid
Track Talk
“There’s a whole book of business out there from existing customers that want to do business with us and know what we’re about but just don't see enough stability to pull that trigger.”
-Union Pacific CEO Lance Fritz
The Latest
· Another strong jobs report for May, together with a resolution to Washington’s deadlock on default, left railroads feeling a bit more optimistic about the U.S. economy. Sure enough, railroad stock prices jumped last week (see chart below). And the chiefs of Union Pacific and CSX, at an investor event, reaffirmed their confidence about future service, volume growth, and operating profits.
· Regarding the May jobs report, the headline was 339k new jobs, more than half of which were created in the health care, professional service, and government sectors. The economy continued to add construction jobs. Retailers including auto dealerships and Big Box stores like Walmart added jobs. Restaurants and bars are still hiring. The transportation sector added jobs too, though railroad employment dipped a bit from April. The critical manufacturing sector, meanwhile, lost jobs but mostly on the nondurable side (textile manufacturers, for example). Auto manufacturers added jobs. Same for chemical manufacturers. The Bureau of Labor Statistics, which publishes the report, also revised its March and April job figures upward. In addition, there are still more than 10m open and unfilled jobs throughout the economy. The labor market, to be sure, isn’t quite as hot as it was last year. Unemployment crept up to 3.7% in May (still very low). Wage growth has moderated. Total hours worked have declined.
· What will the Fed do when it meets next week? Raise interest rates yet again? Or take a pause? On the one hand, inflation is still above target, the job market remains strong, service sector industries like travel are booming, the massive healthcare sector is stable, the financial sector is so far managing higher interest rates reasonably well (following some high-profile bank failures), non-residential construction is up a stunning 25% y/y, and consumer spending—aided by cheaper energy—remains pretty good. Wells Fargo, America’s fourth largest bank, said last week that “things still are
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