The Intersection of Politics and Economics
February 7, 2020
By Brian Feehan, President, ITA
Last year in The MHEDA Journal, I referenced a well-known expression “elections have consequences” and asked how the newly elected divided government would function. Well I suppose we are seeing some of those results in 2019 with the U.S. House of Representatives holding their first public hearings on presidential impeachment, failure to reach agreement on major policy issues — like health care and infrastructure, or even bipartisan issues like net neutrality or the Equal Pay Act. The few things House Democrats and Senate Republicans have agreed on: disaster relief aid, reopening the government after the 2018/2019 shutdown, the resolution to end U.S. involvement in the Yemen war, a bill to protect public lands, and a resolution disapproving of Trump’s use of emergency powers. Welcome to partisan infused divided government leading up to a presidential election year in 2020!
U.S. trade policy remains a prominent topic in Washington and beyond with the two biggest trade negotiations being China and the United States Mexico Canada Agreement (USMCA) formerly known as NAFTA, the North American Free Trade Agreement.
The United States and China have made progress toward concluding a “phase one” trade agreement, but Beijing continues to resist making commitments on a “handful of issues.” It has been reported the talks have hit a snag because Beijing has not committed to the size of future agricultural purchases, a strong enforcement mechanism and curbs on the forced technology transfer.
The latest USMCA negotiations between the United States Trade Representative’s Office (USTR) and Democrats tasked with securing changes to the USMCA could be close to announcing a tentative deal in November 2019. However, there are a limited number of legislative days remaining in 2019 and several labor issues remain outstanding.
Canada and Mexico remain the two largest export countries for U.S. forklift manufacturers. Passage of the United States Mexico Canada Trade Agreement will play a critical role in maintaining the health of our industry. A successful conclusion to USMCA will provide the long-term policy framework manufacturers and consumers need to ensure the North American market remains one of the strongest for our industry.
ITA has a long tradition of supporting free and fair trade and all our comments on trade policies have been very consistent over the years – we believe in the elimination of tariffs and non-tariff trade barriers, and that position remains unchanged today.
Political partisanship and trade policy can influence economic activity; however, measuring the impact is challenging. Therefore, we look to economic indicators for a reading on the economy.
According to the International Monetary Fund’s latest World Economic Outlook report, the global economy is projected to grow 3.0 percent in 2019 and 3.4 percent in 2020. However, it is reported that risks to growth remain in part due to tensions surrounding international trade and technology issues along with softening demand in emerging economies. Despite these downside risks and softening demand, growth in several of the advanced economies persists at relatively robust rates.
Real gross domestic product, the broadest indicator of the economy, measures the value of final goods and services produced in the U.S. in a given time period. Real gross domestic product increased at an annual rate of 1.9 percent in the third quarter of 2019. In the second quarter, real GDP increased 2 percent. GDP growth was stimulated by increases in personal consumption expenditures, federal government spending, and state and local government spending. Government data sources report the deceleration in real GDP growth in the third quarter reflected decreases in inventory investment and nonresidential fixed investment.
In September, the unemployment rate decreased from the previous month to 3.5 percent. Year-over-year, the unemployment rate is down 0.2 percentage points. The unemployment rate in the U.S. remains one very stable component of the U.S. economy and unemployment remains near historically low levels.
The U.S. Labor Department states that total nonfarm payroll employment grew by 180,000 in September. Employment rose in professional and technical services, health care, social assistance, and financial activities. Including this data, job growth in 2019 has averaged 161,000 per month, compared to 223,000 per month in 2018. Manufacturing added 18,000 jobs in September, including 2,800 jobs added in the motor vehicles and parts sector. But, employment in manufacturing has been flat through October in 2019.
Over the past 12 months, job openings have averaged nearly 483,000 per month—a highly elevated pace. These results echo ongoing concerns about the difficulties of finding talent in the tight labor market, which manufacturers continue to cite as their top challenge. For the 18th straight month, the U.S. economy reported more job openings than the number of people looking for work (5,769,000 in September). That statistic suggests there were roughly 1.2 million more job postings than there were unemployed people to fill them.
The nation’s international trade deficit in goods and services decreased to $52.2 billion in September from $55. billion in August. Overall, exports declined $1.8 billion to $206 billion while imports also were down, dropping $4.4 billion to $258.4 billion.
Forklift truck sales in the North American market have fairly consistently mirrored the economic conditions in the U.S. 2018 marked the fourth consecutive year of historic growth, with over a quarter million units sold in 2018, representing a 2.8% increase from 2017.
Year-end forklift truck sales of 260,180 included electric rider trucks (Class 1 and Class 2 combined), motorized hand trucks (Class 3) and internal combustion powered trucks (Class 4 and Class 5 combined). Electric and internal combustion truck sales grew at similar rates, showing annual increases of 2.8 percent and 2.7 percent, respectively. Overall, electric products accounted for approximately 64 percent of last year’s market.
Exceeding the quarter-million-unit mark in sales (now for two consecutive years 2017 & 2018) and nine straight years of growth speaks to the robustness of the industry. Market conditions remain mixed for the industry in 2019. Decelerating growth shows October 2019 year-to-date at 91.5% of the level during the same period in 2018. As noted above, it is important to remember 2018 represented the fourth consecutive year (2015-2018) of historic unit sales.
This past June we celebrated our 6th annual National Forklift Safety Day in Washington, D.C. This day provides an opportunity for the industry to raise awareness and educate customers, policymakers and U.S. government officials on forklift operating safety practices. Experience has (and will continue) to allow us to refine our message and grow participation in the event.
National Forklift Safety Day was held on June 12, 2019 in Washington, DC at the National Press Club and Willard Hotel and included the following speakers:
- Mr. Scott Johnson, ITA Chairman of the Board and Vice President of Sales and Marketing, CLARK Material Handling
- Ms. Loren Sweatt, Acting Assistant Secretary, Occupational Safety and Health Administration
- Mr. Don Buckman, National Forklift Safety Day Chair, Hyster-Yale Group
- Mr. Charles Brooks, Senior Safety Professional, Risks Consultants of America
- Mr. Brian Duffy, Director of Corporate Environmental and Manufacturing Safety, Crown Equipment Corporation
The circulation numbers of combined media outlets reporting on NFSD 2019 was 87,197,904 (an increase of approximately 20,000 from 2018). We are looking forward to and encourage all industry professionals to join us for our 7th annual National Forklift Safety Day that will be held on June 9, 2020 in Washington, DC. Please visit the ITA website www.indtrk.org for information on NFSD 2020.
Jerome H. Powell, the Federal Reserve chair, described an optimistic picture of the United States economy before Congress in November, though he warned that threats to the outlook persisted. Mr. Powell stated in his remarks, “in particular, sluggish growth abroad and trade developments have weighed on the economy and pose ongoing risks.” With the legislative calendar window closing and presidential election year politics looming, it is critical that Congress and the Administration conclude trade policy negotiations to provide business with some “certainty” in the market to make sound decisions based on facts.