Freight Transportation Today
The U.S. freight transportation network moves a staggering volume of goods each year. Over 15 billion tons of goods, worth over $9 trillion, were moved in 1998 (USDOT FHWA 2002a). This translates into 310 pounds of freight moved daily for each U.S. resident. That's a lot of stuff.
The movement of bulk goods, such as grains, coal, and ores, still comprises a large share of the tonnage moved on the U.S. freight network. However, lighter and more valuable goods, such as computers and office equipment, now make up an increasing proportion of what is moved. Moreover, because of changes in the makeup of the U.S. economy and the dramatic growth in international trade, goods are being transported over longer distances in contrast to a few decades ago. FAF estimates that trucks carried about 71 percent of all tonnage and 80 percent of the value of U.S. shipments in 1998 (USDOT FHWA 2002a). A breakdown of freight shipments by mode is shown in Figure 2.
Figure 2. U.S. Freight Shipments by Mode: 1998
Commodities are moved on an extensive and complex transportation network. The U.S. road system alone extends 4 million miles, railroad operations cover another 100,000 miles, and the natural gas and liquid pipeline networks spread out over 1.4 million miles. There are over 19,000 airports in the United States, with approximately 540 serving commercial operations, and over 5,000 coastal, Great Lakes, and inland waterway facilities moving cargo.
Freight Transportation and the Economy
The benefits of freight transportation to the economy are enormous. Freight transportation increases the value of goods by moving them to locations where they worth more and encourages competition and production by extending the spatial boundaries of commodity and labor markets. Freight transportation also stimulates demand for goods and services and employs millions of people. Freight transportation infrastructure is a significant component of our nation's wealth and productive capacity.
From a macroeconomic perspective, transportation accounts for a significant share of the U.S. GDP. In 2000, purchases of transportation-related goods and services accounted for approximately 11 percent of GDP (USDOT BTS 2002). Only housing, health care, and food accounted for a greater share (Figure 3). For-hire transportation services, which include warehousing, contributed about 3.3 percent ($303 billion) to GDP. Many industries and businesses depend on their own transportation operations (primarily trucking) to move goods. These "in-house" transportation services contributed an additional $142 billion to the economy (USDOT BTS 2001b).
Figure 3. Transportation's Importance to GDP: 2000
View the data for figure 3 [HTML, Excel 19KB]
Freight transportation also contributes to the economy by providing jobs to millions of people—an important indicator of economic growth. In 2000, more than 10 million people were employed in transportation-related industries, including for-hire services, vehicle manufacturing, and parts suppliers. Of that total, for-hire transportation (including warehousing) employed more than 4.4 million workers, a majority of whom worked in freight-related jobs. Another 5.5 million people worked in transportation occupations in nontransportation industries, such as truck drivers for grocery stores (USDOT BTS 2001b). Truck drivers, alone, accounted for nearly 70 percent of the total number of transportation occupational workers (USDOT BTS 2002b).
Improvements in freight productivity help the United States maintain its competitive position in the world economy. The Bureau of Labor Statistics reports that productivity for the intercity trucking, railroad, air transport, and petroleum pipeline industries has improved over the last 20 years. The railroad industry has posted the most impressive gains, followed by the pipeline industry. Improvements in railroad productivity resulted primarily from deregulation, divestiture of uneconomic lines, reductions in labor force, and changes in technology and logistics. Productivity improvements in trucking resulted primarily from public investments in a high quality national road network and deregulation.
Transportation infrastructure is a significant part of the nation's wealth. With the exception of railroads and pipelines, transportation infrastructure relies heavily on public investment and joint partnerships between the public and private sectors. The Bureau of Economic Analysis estimated that public stock in highways and streets, alone, was worth $1.42 trillion in 2000 (USDOC BEA 2001). Not only are roads, airports, and railroads part of the national wealth, but the transportation system also stores or carries large volumes of the economy's inventory. At any given time, billions of dollars worth of inventory are either moved via truck, train, ship, or barge, or held in a yard for transport or distribution.
The Bottom Line for Business
Freight is big business. It is a necessity, not a luxury. When transportation system performance decreases, freight-related businesses and their customers are affected in two ways. First, freight assets become less productive. Second, more freight transportation must be consumed to meet the needs of a thriving and expanding economy. Thus, when freight transportation under-performs, the economy pays the price.
Reliable, predictable travel times are especially important in an economy where many goods are expensive and are needed in tightly scheduled manufacturing and distribution systems. Late arrivals can have significant economic costs for factories waiting for parts to assemble and for carriers who are missing guaranteed delivery times.
Growing traffic congestion affects the U.S. economy and our quality
of life.
Source: Washington State Department of Transportation
Congestion is a serious problem for freight transportation. It contributes to making transit times longer and more unpredictable. Unpredictability can hamper just-in-time inventory management and hinder some production processes. As a result, shippers and carriers assign a value to increases in travel time, ranging from $25 to almost $200 per hour, depending on the product carried. The value of reliability (i.e., the cost of unexpected delay) for trucks is another 50 percent to 250 percent higher (USDOT FHWA 2001b). Hence, congestion increases the cost of freight and therefore has an effect on the U.S. economy.
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