April
2008 Quarterly Forecast > Port of Oakland: Growth with Few Jobs
Special Section: Port of Oakland: Growth with Few
New Jobs
By Jerry Nickelsburg
The Port of Oakland, and in particular the maritime port, has been a source of jobs for the region for some time. The U.S. Department of Transportation estimates that $25 Billion in goods passed through the port in 2003 making the port the 9th busiest in the U.S. and the fourth busiest container port. The port itself creates about 10,000 direct jobs, but has a much larger impact on jobs derivative of port activity including rail, trucking and warehousing jobs. One of the interesting observations about modern seaport activity is that growth in the throughput of the port often does not show up in growth in these derivative jobs. Figure 1 shows this is the case for the Port of Oakland. From 1993 through 2000 there was steady growth in the number of TEU’s (twenty foot equivalent container units) handled by the Port and some marginal growth in derivative jobs. Beginning in 2000, the Port of Oakland expanded infrastructure and carrying capacity including two intermodal terminals and dredging, and the total volume of TEU’s through the port grew rapidly. However, the number of jobs in trucking and warehousing went down over this period. This paradox of port growth has two simple explanations. Competitive, congestion and environmental pressures induce ports to institute cargo carrying innovations which are, among other things, labor saving. Second, not all growth is equal. The total number of TEU’s through the port does not generally dictate the labor requirement. It is the larger of the inflow or outflow of containers that approximately sets the labor requirements and if the smaller of the two grows while the larger does not, there is very little impact on local employment. This is exactly the case of the growth of the Port of Oakland since 2000.
Figure 1
To understand the employment question and forecast the future evolution of port traffic it is useful to look at the component parts. The Port of Oakland in unusual in the U.S. in that export volume has been greater than import volume by weight and bulk over the last 20 years, and the value of imports are twice the value of exports. Its location close to Central Valley agricultural production and Northern California lumber and wood products production has provided the Port with a natural advantage in the export of products from these industries to a rapidly growing Asian middle class market. Consequently, unlike the Port of Los Angeles, outbound containers are mostly full. Figure 4 graphs Imports, Exports and Empties and illustrates that exports through the Port have been growing steadily since 1992 with a brief hiatus in growth during the economic slowdown of 2001. The primary destination of these goods is East Asia. The relationship between economic growth in East Asia, particularly China, South Korea, Japan and Taiwan, and exports through the Port as measured by TEU’s is strong and sufficient to explain 87% of the growth over this period and is therefore the driver of our forecast of outbound TEU’s (Figure 2).
Figure 2
Imports have lagged behind exports at the Port of Oakland as the Ports of Los Angeles and Long Beach and the infrastructure of the Inland Empire provide stiff competition for imported goods into the U.S. Recent Investment in infrastructure by the Port of Oakland, a lowering of trade barriers with Asia, and well as capacity issues in Southern California have resulted in a more rapid growth in inbound TEU’s since 2001 (Figure 3). The primary determinant of the import demand is the demand by U.S. consumers for imported manufactured goods. Through the last six years this demand has been strong. While the demand growth fell off in 2007 and promises to do so again this year, the unique position of West Coast ports to the manufacturing centers of Asia give them a unique advantage in capturing the increased national demand for imports.
Figure 3
With the steady growth in exports and the strong growth in imports why have more derivative jobs not been created? In Figure 4, Imports, Exports, and Empties, the top line is the ratio of the total number of inbound containers, both full and empty, to the total number of full and empty outbound containers. Although there is some variation year to year, the basic message is that the number of inbound containers stays approximately the same -- at around .79% -- of the number of export containers. So, while both are growing, the faster growth of imports is only filling inbound empty containers and not adding to the total container volume. In the Southern California ports the opposite is the case, it is the import containers that are dictating the number of container movements, not the export containers and increased exports are only filling empty outbound containers. The rationale for the lack of job growth is, whether empty or full, the containers have to get back to their origin to ship the next batch of product. Full is better for the container owner, but does not impact the logistical necessity of repositioning. Since handling a container by truck or rail is the pretty much the same regardless of its filling, or lack thereof, no new jobs are generated by the growth in the lower volume direction except to the extent that additional customs, bill of lading, and shipping paperwork administration is required to track and manage the goods inside of the container.
Figure 4
For the balance of the puzzle we return to the first chart. Notice that while there has been virtually no increase in overall employment, there has been an increase in rail employment. Rail is a much more efficient form of freight transport than trucking and the investment in the BNSF and UP intermodal terminals has routed more containers off of trucks and onto trains. As a consequence the increased traffic is able to move economically further inland to distribution centers and both warehousing and trucking employment has suffered. This is not to say that this is a bad thing. Fewer trucks on the road alleviate congestion and pollution and the lower cost of distribution keeps the ports competitive. But, in spite of the growth in the ports, one ought not to expect a big pop in growth rates of derivative employment. To be sure there will be some, but it will be modest compared to the volume growth.
To forecast the future volume of traffic through the Port we again look at export and import demand separately. Using the World Bank forecast for East Asia economic growth our model generates a growth of outbound TEU’s of 5.3% for 2008 and 6.8% for 2009. Using our U.S. forecast for import growth, our model generates a forecast of 3.8% and 6.9% growth. These two forecasts, and the historical relationship between import and export TEU’s yields a total number of TEU’s handled in 2009 at 2.69M an average annual increase of 6.2% with exports volume greater than imports.
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