Market Economics in Tough Times

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Market Economics in Tough Times

An In-Depth Look from TIA’s Chief Economist Noël Perry

 

Truck Rates Are Tumbling. Who’s to Blame?

Earlier today, the Federal Government released its initial estimate of 2020:1 economic growth.  That was an important event because 2020:1 is the first quarter to contain any of the effects of the economic shutdowns imposed by governments in their attempts to contain the COVID-19 virus.

The value of -4.8% is the worst U.S. quarterly economic performance since the Great Recession, and that negative figure is largely the result of only the last month of the quarter. I estimate that the March number was -13.8%. Unfortunately, that March number will probably be topped in April, and perhaps May. If so, the second quarter will come in at -15% or worse, making it the worst economic quarter in U.S. history.

Why is that important? When the economy tanks, so does trucking. When trucking tanks, so do rates.  That is what markets do. So, why are rates doing what the Truckstop.com numbers in the accompanying graph shows? It’s the economy stupid; or more specifically, it’s the shutdowns from COVID-19 control measures.

I write this piece, an update of something I wrote last fall, because being human, when something goes bad, we look for a scapegoat. As usual, in trucking, when something goes bad, people frequently point their fingers at my friends in the brokerage space. People are always suspicious of people that “arrange” things rather than “do” things, even if the “arranging” is a necessary part of the doing. After all, a broker’s work is basically work outsourced from shippers and carriers. The work must be done for every trucking transaction.

In around a quarter of cases, people find it more efficient to pay a broker to do that work rather than take the time and money it takes to do it one’s self.  Nonetheless, during tough times it is common practice to badmouth the brokers. Somebody must be at fault here, right? Well, somebody may be at fault here, or maybe it is just the virus. But it sure isn’t the brokers. Here’s why:

  1. What Did Adam Smith Teach Us? The North American brokerage market is as freely open a market as any in the world, regardless of commodity or service. There are no pricing regulations and precious few barriers to entry. If a broker is regularly mistreating carriers (carriers that, in many cases, they have been working with for years), the carriers need simply to shift to another of the 16,000 licensed brokers – all of whom are hungry for business, especially now.
  2. What Goes Up Eventually Goes Down? People often cite the tendency of broker margins to increase in tough times as evidence of the broker’s greed. Indeed, broker margins do sometimes increase during times of low pricing, but not from greed – but rather from a long-standing and well-known fact of truckload pricing economics. In softening markets, carrier prices usually fall moderately faster than shipper prices, with broker margins rising. Of course, in rising markets, the reverse happens: carriers’ rates rise more rapidly than shippers’ rates and broker margins fall. Using the broker-bashers’ logic, brokers must have been scrimping on their profits to help the carriers in 2017 and the first half of 2018 when rates were rising. My broker friends value their carriers, but not that much!
  1. Accounting 101: The cycle in broker margins is primarily an accounting issue. Market economics tells us that scarcity or surplus of assets affects the pricing of assets and the cost of services provided by those assets. Intermediaries, like brokers, add a relatively fixed cost to facilitate the match of assets and demand and execute the accompanying transactions. It follows that such a fixed cost will occupy a smaller portion of a total rate, in a tight market with high rates than in a soft market with low rates. The numerator, the broker’s fee, doesn’t change while the denominator, the price of the load, does. The percent represented by the broker’s fixed fee does change. A simple calculation using average rates for the period 2018:2 to 2019:2 shows an increase in broker’s margin of 306 basis points using a fixed absolute value for the broker’s take. That example yields the same internal broker dollar return in both cases: same service, same absolute broker payment, same “profit.” Note importantly that, recently, broker margins have been falling in a falling market, indicating a significant reduction in broker profit. Brokers have been sharing the pain this time around and will continue to do so in these tough times until our governments reopen the economy.
  1. Volatile Markets Increase the Value of Broker Services: Finally, and perhaps more importantly, brokers exist because they can solve the tough problems of matching spot and other difficult freight to capacity. The regular freight that gets covered by contracts is the easy stuff. Do a deal in January, and the freight moves for a year with no additional transactional work. Not so with the spot market. In volatile times like these, when freight volumes and shipper and carriers’ strategies change radically, the number of tough problems wanting solutions skyrockets. Yes, the price of the move may fall (or rise when the economy recovers), but the difficulty of the work is greater when the market is changing. We need brokers more than ever – right now!

Here’s the Point:

Pointing fingers during a time of stress has little value. Carriers, and shippers, would be best served by focusing on the best ways to get their loads moved and trucks full. For at least a quarter of freight, that process benefits from, or more powerfully, “needs” brokers. Brokers exist and have a growing share of the market because they provide a useful service to shippers and carriers.

Those services retain their value throughout the business cycle, even if carriers are happy at the top and unhappy at the bottom, and shippers are unhappy at the top and happy at the bottom.  The notion that an entire group of market participants is operating to the market’s detriment is a preposterous claim that provides no insight to carriers, shippers, or any rational actor in this market.

 

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The Transportation Intermediaries Association (TIA) is the professional organization of the $214 billion third-party logistics industry. TIA is the only organization exclusively representing transportation intermediaries of all disciplines, doing business in domestic and international commerce. TIA is the voice of the 3PL industry to shippers, carriers, government officials, and international organizations. TIA is the United States member of the International Federation of Freight Forwarder Associations, FIATA.

TIA Daily COVID-19 Update: April 30th

As TIA continues to monitor the situation surrounding COVID-19 and it’s impact on the 3PL and transportation industries, here is your Daily Update for April 30. As a reminder, you can find all the latest information, resources, guidance, and news from TIA’s COVID-19 Response Center.

ADVOCACY UPDATE:

TIA continues to hold daily zoom calls with Members of Congress. TIA Government Affairs staff participated on a call last night with House Transportation & Infrastructure Committee Chairman Peter DeFazio (D-OR-4), who indicated that the House is still working to move a five-year infrastructure bill this Congress, and possibly attaching it to the next COVID-19 relief package. President Trump and Speaker Pelosi are in lockstep to get this “stimulus” infrastructure package done as soon as possible, but Senate Republicans have indicated they would like to wait and concentrate on the relief efforts.

TIA UPDATE:

Today, I released a video discussing the current state of the transportation industry and how the nation’s 3PLs are responding to the COVID-19 crisis. This video is in response to recent claims regarding unethical behavior by brokers during the crisis. While there will always be unscrupulous actors in any industry taking advantage of an emergency or crisis, carriers have a choice in which brokers they work with. By selecting a broker with the TIA logo, carriers can rest assured that they’ve selected one of the industry’s most ethical businesses.

FINANCE 101 REMINDER:

Reminder to register by end of the day for your complimentary 60 day access to TIA’s new Finance 101 online course. In recognizing the unprecedented disruptions to all aspects of business and life caused by the COVID-19 crisis – as well as looking ahead to the expected boom in business once the economy reopens – TIA is offering complimentary registration to TIA Members. Once registered for the Finance 101 online course, users will have full access for 60 days.

NOËL PERRY UPDATE:

Another typical weekday for the U.S. and most European countries. The U.S. remains slightly better than a week ago.

The big actor in the States was California which added almost a thousand more cases than in any of the previous six days. This was obvious a catchup count, something California has shown a penchant for.

The next two days will be telling, being the typically highest count days of the week.


We’ll be back tomorrow with COVID-19 updates and information that came through overnight.

Please enjoy the Andrew Sisters as they sing “Three Little Sisters.”

TIA Daily COVID-19 Update: April 29th

As TIA continues to monitor the situation surrounding COVID-19 and it’s impact on the 3PL and transportation industries, here is your Daily Update for April 29. As a reminder, you can find all the latest information, resources, guidance, and news from TIA’s COVID-19 Response Center.

TIA UPDATE:

Don’t Miss Out! TIA is excited to announce the launch of our new Finance 101 online course. In recognizing the unprecedented disruptions to all aspects of business and life caused by the COVID-19 crisis – as well as looking ahead to the expected boom in business once the economy reopens – TIA is offering complimentary registration to TIA Members through tomorrow, April 30, 2020. Once registered for the Finance 101 online course, users will have full access for 60 days.

VIRTUAL LUNCH & LEARN UPDATE:

Reminder to join us tomorrow at 12:00 PM ET for the latest installment of TIA’s Virtual Lunch & Learn webinar seriesWhat Shippers Want… Technology. It is the hot topic at the moment and can often determine if you land that customer or not. Additionally, technology will likely be the ultimate determination on which companies continue to thrive. TIA will be releasing a comprehensive whitepaper on this lunch and learn on this exact topic. Please join Aaron Huff from CCJ as the moderator of this great panel of shippers and 3PLs as they discuss what their needs are from a technology perspective. Register now!

 

NOËL PERRY UPDATE:

The U.S., along with many other countries, experienced its normal Tuesday weekday surge. However, Exhibit 1 shows that this week’s surge yielded values lower than last Tuesday’s for both cases and deaths per day. The data reminds us to be patient with the American progress while remaining confident in its positive direction.

Exhibit 3, the U.S. state detail, shows us the cause of the Tuesday surge, big catchup counts in a number of the big city eastern states. Most had much lower numbers the previous several days. Note also the addition of two new columns that present the percentage change from the maximum daily values since we began collecting the state data. The presence of nine states that set new maximums for deaths registered in a day tells us that we have a ways to go yet.

You can identify them by the red coloring in the left-most column and the zero values for their change from the maximum. That means they either tied the previous max or set a new one. This weekly variation reminds us to pay as much attention to improvements in mid-week days as to the prettier numbers from weekends.


We’ll be back tomorrow with COVID-19 updates and information that came through overnight.

Please enjoy Count Basie and “Jivin’ Joe Jackson.”

TIA Daily COVID-19 Update: April 28th

As TIA continues to monitor the situation surrounding COVID-19 and it’s impact on the 3PL and transportation industries, here is your Daily Update for April 28. As a reminder, you can find all the latest information, resources, guidance, and news from TIA’s COVID-19 Response Center.

FEDERAL GOVERNMENT UPDATE:

TIA’s Government Affairs team has been keeping busy and not letting the COVID-19 crisis slow their advocacy efforts. Over the past few weeks, Chris and Scott have been actively meeting with Members of Congress via Zoom video conference. These Zoom meetings allow us to promote TIA’s legislative priorities, while highlighting the impact of TIA Members in these members’ districts and state. If you are interested in participating in a Zoom call with your Members of Congress, please contact Chris Burroughs at [email protected].

TIA UPDATE:

TIA has launched a brand-new members-only podcast focused on TIA’s government affairs and advocacy efforts. The TIA Delivers Advocacy Insights Podcast has been developed to cater to active TIA Members, providing industry updates and insights on all of TIA’s current lobbying efforts on Capitol Hill. In the first episode, we hear from Chris Burroughs, TIA’s Vice President of Government Affairs, who discusses the importance of government affairs to both the association and the 3PL community. You must log-in to the website to access this members-only content.

VIRTUAL LUNCH & LEARN UPDATE:

Thank you to everyone who joined us this afternoon for our Virtual Lunch & Learn panel discussion – New Frontier: How to Best Protect Your Operations During COVID-19. Join TIA every Tuesday and Thursday at 12:00 PM ET for the latest installment. Reminder that all previous webinars in the series are available on-demand.

 

NOËL PERRY UPDATE:

More pretty colors yesterday for the U.S. and Europe. Of the countries, only Mexico shows red, but it was down for yesterday, just not enough consecutive drops to be sure the increasing trend is over.

In the U.S., cases were down again despite it being a weekday. Monday was the lowest new case day since 30 March when the numbers were climbing rapidly. U.S. deaths were up modestly, but much less than the normal Monday rise. We have added two new columns in the state data to show the percentage drop in the numbers since the peak day (since 21 April). Some of the numbers are impressive indeed. Note also that 25 states had less than ten deaths yesterday. Those are very promising numbers. Understandably, restrictions are being lifted in a number of states. Even Pennsylvania is allowing golf courses, private campgrounds, and marinas to reopen on 1 May.

As we watch the numbers decline, it is instructional that only six of the 24 countries we follow have reached recovery stage. Of those 18 countries not in full recovery, only one, Switzerland, is getting close to full recovery. We are reminded of the time it is taking this contagion to recede. Having said that, the statistics to date show no signs of a second surge in cases, nor are the totals anywhere near the catastrophic projections we heard a month ago. It looks like this flu strain will go down as well above average but within the range of the several notable flu seasons since World War II.


We’ll be back tomorrow with COVID-19 updates and information that came through overnight.

On this last Tuesday of April, I leave you with The Ink Spots’ “We Three (My Echo My Shadow & Me)” – enjoy!

TIA Daily COVID-19 Update: April 27th

As TIA continues to monitor the situation surrounding COVID-19 and it’s impact on the 3PL and transportation industries, here is your Daily Update for April 27. As a reminder, you can find all the latest information, resources, guidance, and news from TIA’s COVID-19 Response Center.

The TIA 2020 Membership Directory is currently in production and will be published this summer. TIA encourages you to review your company’s contact information and make updates as needed. This will ensure TIA has the most accurate directory for all TIA Members to use. To review your listing and make changes, click here. Please Make Your Updates by COB Today!

 

FEDERAL GOVERNMENT UPDATE:

The SBA PPP loan program is back live and active with a new $320 billion available for small businesses. If you didn’t take advantage of the last round of money, please act quickly on this, as it will not last long. TIA Government Affairs staff has been actively working with Members of Congress on holding zoom meetings to tell the important role you all are playing in the supply-chain during this time of crisis. If you wish to participate on one of these calls, please contact your Government Affairs team at [email protected].

 

TIA UPDATE:

TIA is excited to announce the launch of our new Finance 101 online course. In recognizing the unprecedented disruptions to all aspects of business and life caused by the COVID-19 crisis – as well as looking ahead to the expected boom in business once the economy reopens – TIA is offering complimentary registration to TIA Members through April 30, 2020. Once registered for the Finance 101 online course, users will have full access for 60 days.

 

VIRTUAL LUNCH & LEARN UPDATE:

Reminder to join us tomorrow at 12:00 PM ET for the latest installment of TIA’s Virtual Lunch & Learn webinar series – New Frontier: How to Best Protect Your Operations During COVID-19. In this webinar, a panel of insurance experts will discuss coverages during the COVID-19 pandemic. Learn more about how best to protect your operations against claims from allegations of negligent hiring, vicarious liability, high risk cargo, and other issues to consider before moving freight. Register now!

*This webinar is about risk management and is not intended to provide legal advice, for which those attending should consult their legal counsel.

 

NOËL PERRY UPDATE:

Lots of pretty colors today. Part of it is certainly the weekend effect. Still, you can see in Exhibit 1 that this Sunday’s value is well below the Sunday values of the last two weekends. The U.S. death/day count is now less than half of that terrible number of last Tuesday. Let’s pray that we get only a modest weekday inflationary effect this week, and next Sunday’s numbers are lower still.

My approach to these numbers has consistently been guided by the statistical evidence that this contagion has a limited life/size and eventually inflects and starts a decline, fitful at times, but a decline that leads to recovery. Although the inflection points and rate of decline are later and less steep than originally indicated from China and South Korea, they have happened in Western Europe, Malaysia, and Australia and appear to be happening here.


We’ll be back tomorrow with COVID-19 updates and information that came through overnight.

Please enjoy Martha Tilton as she sings, Cole Porter’s It’s De-Lovely from “Red, Hot and Blue.”

TIA Daily COVID-19 Update: April 24th

As TIA continues to monitor the situation surrounding COVID-19 and it’s impact on the 3PL and transportation industries, here is your Daily Update for April 24. As a reminder, you can find all the latest information, resources, guidance, and news from TIA’s COVID-19 Response Center.

FEDERAL GOVERNMENT UPDATE:

Today President Trump signed into law the latest interim relief package that provides an additional $310 billion for the PPP loans. TIA recommends that all members that didn’t take advantage of the first round of funds, needs to take advantage of this pot of funds as soon as possible, as it is high unlikely that it will last. There have been several questions about what to do with commission based employees, and unfortunately there isn’t too much guidance on this from the SBA and Treasury. The guidance defines the payroll costs as:

Payroll cost means the sum of payment of any compensation to (or income for sole proprietors and independent contractors), that is a wage, commission, income, net earnings from self-employment, or similar compensation, paid during the Covered Period, in an amount which does not exceed $100,000 per person on an annual basis, prorated over the Covered Period. At least 75% of the forgiven amount must fall into this category.

TIA UPDATE:

TIA is excited to announce the launch of our new Finance 101 online course. In recognizing the unprecedented disruptions to all aspects of business and life caused by the COVID-19 crisis – as well as looking ahead to the expected boom in business once the economy reopens – TIA is offering complimentary registration to TIA Members through April 30, 2020. Once registered for the Finance 101 online course, users will have full access for 60 days.

INDUSTRY UPDATE:

Today’s industry update comes to us from Ken Adamo, DAT’s Chief of Analytics. It is our mission at DAT to help customers mitigate uncertainty in their businesses. We have been closely observing trends in the markets in near-real time and aim to provide valuable and actionable information to the market, not sensational and reactionary headlines. To advance that objective, we are releasing this market update with hopes that it provides value and helps those trying to understand this tumultuous market.

NOËL PERRY UPDATE:

Another mixed mid-week day, although the U.S. is a thousand cases per day below the average of last week’s weekdays. Again, the death count fell. You can see in the last column of Exhibit 2 that most states are below Tuesday’s level, the day I began the state analysis. Massachusetts produced almost all the case increase yesterday. They have been up sharply the last two days, reflecting their acceleration of testing. The Massachusetts death count per day is stable. New York and New Jersey are also testing more people per day.


We’ll be back on Monday with COVID-19 updates and information that came through over the weekend.

For our [5th or 6th] Friday of captivity, please enjoy the antics of Bob Hope and Bing Crosby as they sing “Put it There Pal,” with clips from their “Road Pictures” which have kept us entertained since 1940 with the “Road to Singapore.” Bob Hope made 57 tours for the USO between 1941 and 1991 and was declared an honorary veteran of the U.S. Armed Forces in 1997 by an act of Congress. Crosby joined Hope on many of these tours and conducted his own. True national treasures that continue to make us smile and laugh – two things we need a lot of right now. Have a great weekend, do something different, sit in a different chair.

TIA Daily COVID-19 Update: April 23rd

As TIA continues to monitor the situation surrounding COVID-19 and it’s impact on the 3PL and transportation industries, here is your Daily Update for April 23. As a reminder, you can find all the latest information, resources, guidance, and news from TIA’s COVID-19 Response Center.

FEDERAL GOVERNMENT UPDATE:
The House is set to pass the additional relief package this afternoon that was passed by Senate on Tuesday, sending it to President Trump to sign into law. Work is also underway on Phase IV of the relief efforts. We expect that package to be considered around mid-May.

LUNCH & LEARN UPDATE:
Thanks to everyone who joined us this afternoon for our Virtual Lunch & Learn webinar, Sales Strategies for Uncertain Times, presented by Bill Bartlett. As a reminder, all of TIA’s Virtual Lunch & Learn webinars are available on-demand.

TIA UPDATE:
There was a guest editorial in yesterday’s Wall Street Journal from Kurt Huffman, a restaurant owner, about the challenges of enticing idled employees back to work. The editorial, Our Restaurants Can’t Reopen Until August, addresses the unintended consequence of Congressional action. Mr. Huffman states that the starting wage for a line cook in one of his restaurants is $15 hour. The cooks receive at least $1 an hour in tips, so at a minimum, they make $16 an hour, or $640 before taxes for a 40-hour week. Normal Oregon unemployment would have paid the cooks $416, with the $224 a week shortfall acting as an incentive to find a job.

With the CARES Act, however, those workers are now receiving $1,016 a week, or $376 more than if they were employed, an hourly rate of $25.40. The extra CARES Act payments run through July 31, which is why Mr. Huffman states that he will not be able to fully open until August. This same knock on effect will translate into every hourly business.

INDUSTRY UPDATE:

 

 

Each week Truckstop.com publishes a summary of their spot market data in a document called Trans4Cast. The summary is available for free to all their customers. If you are a Truckstop.com customer, I strongly recommend you make that report your regular early week reading. The two most revealing data sets in the report are summarized below. The first, the Truckstop.com Market Demand Index (MDI) is the ratio of loads posted to trucks posted.

As such it is a rough, but useful proxy for capacity utilization, or market tightness. If a lot more loads are posted than trucks, the index goes up, indicating a tight market and vice versa. In the example below you can see the surge in tightness from the “hoarding” effects of the virus (Weeks 6-11 to the right) followed immediately by a collapse in tightness as all the business closed due to the Governors’ restrictions (latest weeks to the right). One hopes that the little curl in the drop at the bottom right is evidence that we have reached a floor. For comparison, the lowest reading for this index during the Great Recession was below 3.

Reaching a floor is important because of what we see in the second graph, a picture of the rates offered by people posting on Truckstop.com’s load board. The graph shows that the already low spot rates levels have collapsed over the last three weeks in response to the loosening of the market shown in the first graph. One hopes that we are nearing a floor. For comparison, the lowest readings for posted rates during the Great Recession were ten cents per mile below the current levels. Note that the data is presented seasonally adjusted to reveal the underlying market forces free of confusing seasonal effects.

One final point: In a market starved for good, real-time data, this Truckstop.com data is a major asset. It and several other such sources all help businesspeople understand what is going on in times of stress, as things are happening, rather than guessing and then studying data months or years after the facts to see if the guess was accurate. In a time of such rapid change, companies who are alert to such data and in possession of contingency plans will have a major advantage.

NOËL PERRY UPDATE:
Wednesday was a mixed day as is typical of mid-week days. The U.S. case count was up significantly, influenced strongly by New York and Texas. From here on we will be presenting the state breakouts (Exhibit 2.) so that you may see where caution is most necessary and where relaxation of restrictions is likely.

To the good, there is lots of green in the U.S. death count change, save only Texas. We are hopeful that such a midweek reduction is a sign of the long-awaited inflection point for U.S. deaths per day. Europe was also down in deaths, although up modestly in new cases, notably in Italy.

To illustrate the difficulty of interpreting these statistics we have learned that some states are including their “probable’s” counts, situations where the cause of death was unclear.

We’ll be back tomorrow with COVID-19 updates and information that came through overnight.

Enjoy Tex Beneke and the Glenn Miller Orchestra as they play “Gal in Calico.

TIA Daily COVID-19 Update: April 22

As TIA continues to monitor the situation surrounding COVID-19 and it’s impact on the 3PL and transportation industries, here is your Daily Update for April 22. As a reminder, you can find all the latest information, resources, guidance, and news from TIA’s COVID-19 Response Center.

FEDERAL GOVERNMENT UPDATE:
Last night the Senate approved the latest relief package that would provide an additional $310 billion for the SBA PPP loans. The House is expected to take up the package tomorrow and approve it, thus sending the bill to President Trump for his signature. Additionally, we have received inquiries regarding what “utilities” are included as accepted costs under the PPP loan. The language mentions “transportation,” which has been interpreted to mean fuel costs for business vehicles. This cannot be used for business activities related to the arrangement of transportation.

LUNCH & LEARN UPDATE:
Be sure to join us tomorrow at 12:00 PM ET for the latest Virtual Lunch & Learn – Sales Strategies for Uncertain Times. Presented by Bill Bartlett, this webinar will review five strategies to keep your business on track during the difficult times we are facing. Participants will be able to employ these strategies and tactics immediately, directly impacting their bottom line and positioning their business for success. Register now.

TIA UPDATE:
TIA is excited to announce the launch of our new Finance 101 online course. In recognizing the unprecedented disruptions to all aspects of business and life caused by the COVID-19 crisis – as well as looking ahead to the expected boom in business once the economy reopens – TIA is offering complimentary registration to TIA Members through April 30, 2020. Once registered for the Finance 101 online course, users will have full access for 60 days.

NOËL PERRY UPDATE:
Yesterday was a great day for U.S. new cases, dropping 2,138 on a weekday when the number usually goes up. It was not a good day for deaths, which reached a new peak, 865 above the previous day.

You can see the difference between the history of cases and deaths in exhibit 2. Both series have a distinct weekday pattern, although the death line has a much greater variation weekday to weekend. While the case numbers are influenced by the number of tests, counting them is simple. Does the test show positive? Not so with deaths, where there is considerable interpretation as to whether COVID-19 was the causal factor.

Apparently, states are handling the classification chores during the weekdays, hence the 30% to 40% increases in reports compared to weekend days. Still, the lack of a clear inflection in the death count is disappointing. We got that in cases more than two weeks ago. In Western Europe inflection for deaths occurred twelve days after inflection in cases. We are thus due this week for the death’s inflection, perhaps today.

 



We’ll be back tomorrow with COVID-19 updates and information that came through overnight.

Please enjoy the Andrew Sisters as they sing the “Pennsylvania Polka.

A Time of Crisis: PPP Loans

Scott Marks | TIA Government Affairs Manager

 

The Paycheck Protection Program (PPP) has become the center of the U.S. business world in the past month, thrust into the limelight by the CARES Act – the sweeping bi-partisan, Phase III legislation used to jump-start the economy following a record-breaking slump as a result of the novel coronavirus (COVID-19) outbreak.

Contrary to popular belief here in Washington D.C., most individuals do not like interacting with the Federal government. This sentiment quickly changed from not liking to interact to needing to interact. The country finds itself waging a war against COVID-19 on two fronts – the health of the people and the health of the economy, each of which requires different strategies and approaches required to heal and rejuvenate.

The current tool of choice for legislators in D.C. is the PPP, a forgivable loan program available to small businesses with fewer than 500 employees It stipulates the loan will be forgiven if 75% of the amount is used to keep employees on the payroll. The PPP is a big deal for companies and an absolute lifeline to owners reeling from this economic disaster. Many companies have had to furlough and layoff dozens – if not hundreds – of individuals who they count as not only employees but often a second family.

The PPP funding has been deleted and will remain so until Congress takes action to replenish the funds. The Senate passed a relief package that provides an additional $310 billion for the PPP loans on April 21, and the House is expected the pass this package on April 23, thus sending the package to the President’s desk for an expected signature.

TIA represents third-party logistics companies that in most cases do not own assets or vehicles, nor do they touch freight as it moves across the globe. They do, however, facilitate the global movement of freight. Our 1,800 member companies use extensive technological and knowledge-based assets to successfully move freight from Company A (a manufacturer,) using Company B (a trucker, airfreight, train, or ocean liner) to Company B (a storefront who needs freight from Company A). TIA’s member companies do this effectively, efficiently, and ethically.

As one can imagine, most of our members were hit hard by the slump and slowdown in freight which needs moving across the country, that being said some of our members thrived and rose to the occasion especially in the arena of “essential services,” a phrase which can mean something different in all 50 states and federally. Third-party logistic companies who were tasked with moving medical supplies, grocery store food, and government equipment might have a boost in numbers and activity. Contrary to essential needs, our members who run the logistics for non-essential manufacturers (such as furniture or any number of leisure items) are being decimated right now. These members are seeking assistance from the Small Business Administration (SBA), the government agency implementing the PPP.

Our members had a mixed experience when applying for the PPP, whose rollout has been deemed as flawed from the start. It should be noted, however, that this was a monumental undertaking for the federal government – taking $350 billion in funds authorized when President Trump signed the legislation March 27, to starting to move money into business accounts of companies in all 50 states and territories some 170 hours later. Once again, a monstrous undertaking for an organization that in FY2019 handled just over $20 billion in the same types of loans.

I applaud the effort behind the CARES Act, spearheaded by leadership in both chambers of Congress. This legislation was a great bipartisan response by Congress, answering the call to action. TIA Members all over the country thank them for their proportioned response in a time of crisis.

The next phase in the process of economic recovery was the implementation of the CARES Act, led by the executive branch headed by President Trump (but more narrowly by Secretary of the Treasury Steven Mnuchin and even more narrowly by SBA administrator Jovita Carranza). The feedback received from members regarding their experience working with banks and the PPP applications came in swiftly.

One of our members was unable to apply until April 10th due to his status as a 1099 contract worker and not an employee of a company. This member vented about how frustrated he was with the process, the formula for him is not sustainable as the amount is cripplingly low. He is from a rural part of Texas and struggled to get a bank to hear him out and accept and application, he was given misinformation from one of three banks (all which he had previous accounts with). Thankfully, TIA’s Government Affairs team was able to connect him with his member of Congress, whose constituent services team provided much-needed assistance.

Another member stated to me that she is stuck in limbo: the application has been approved at the bank level, but the fund has run out of money, and she’s now stuck between the application phase and the funding phase of the process. A third member noted, “This has been the most confusing process to get documentation to the correct lender” and “very disappointing.” One stated, “once everything was in place it went rather smoothly.”

Where We Stand Now: Republicans offered last week to quickly fund PPP alone and keep discussions moving on hospital and localities, but this was repeatedly blocked by Senate Democrats who insisted money for those hospitals and localities be included. At the time of this writing, the Senate has passed legislation which provides the PPP with an additional $310 billion in funding ($60 billion of which goes directly to rural and small lenders, $ 60 billion in Economic Injury Disaster Loans (EIDL) grants and loans, $75 billion for hospitals, and $25 billion for COVID-19 testing. I do believe the PPP will be funded this week, as the political pressure is mounting since the funds were fully depleted in less than two weeks.

As the process moves forward, the challenges of passing additional legislation increases. You will likely see an effort to fund every major industry, another personal check to taxpayers, multiple rounds of PPP funding, and more.

The United States and the entire global economy are reeling from this disaster. Jobless claims are up and mental health is down, but we all must do what we can to get through this. For our members, that task is simple in definition but complicated in action: we must keep freight moving – 24 hours a day, 7 days a week for the next couple months to stock shelves, support our medical community and get equipment to the most needed groups as quickly as possible.

TIA Daily COVID-19 Update: April 21

As TIA continues to monitor the situation surrounding COVID-19 and it’s impact on the 3PL and transportation industries, here is your Daily Update for April 21. As a reminder, you can find all the latest information, resources, guidance, and news from TIA’s COVID-19 Response Center.

FEDERAL GOVERNMENT UPDATE:
The latest COVID-19 relief package (replenishing the SBA’s PPP loan with more than $400 billion in additional funding) is headed to the Senate floor this afternoon and expected to pass by unanimous consent, since an agreement between Republicans and Democrats has been reached. The House is expected to take up the measure on Thursday.

LUNCH & LEARN UPDATE:
Thanks to everyone who joined TIA and Noël Perry this afternoon for the Virtual Lunch & Learn, which reviewed COVID-19 data and the examined the effects of sequestration on the economy and trucking. As a reminder, all Virtual Lunch & Learn webinars are also available on-demand!

NOËL PERRY UPDATE:
The U.S. showed a typical weekday increase yesterday, but not up to the level of last week’s increase. Tomorrow will tell us more about that.

Europe had a very good day – excepting Belgium. Having a decrease despite the weekday surge is a good sign for Europe. Apparently, Singapore had a metrics update, given their untypical surge.

The world numbers are now down from their peaks, 13% on new cases and 33% on deaths. The downward slope is not as steep as we would like, but it is definitely trending downward.


We’ll be back tomorrow with COVID-19 updates and information that came through overnight.

On a blustery Tuesday across the Nation’s Capital, please enjoy The Pied Pipers and “Dream.”

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