SeatradeMaritime: US economy hit by job losses and Gulf conflict

Rising unemployment, fears of a prolonged blockade of the critical Straits of Hormuz and the destruction of energy production centres in the Middle East all point to new levels of uncertainty.

In his latest newsletter on the US trade, consultant Jon Monroe points to the Bureau of Labor Statistics which had expected 65,000 new jobs to be created in February, instead there was a loss of 92,000 jobs, a swing of 157,000 jobs compared to earlier forecasts.

This matters, according to Monroe, because, “Employment trends often serve as one of the clearest indicators of consumer confidence, and rising job losses tend to have a direct impact on spending behaviour. Simply put, nothing curbs consumer spending faster than concerns about unemployment. 

If the US is the engine of growth in the global economy, it seems President Donald Trump has removed the spark plugs, with the data revealing that labour participation slipped to roughly 62%, as fewer Americans were working or actively seeking employment. 

“When participation drops, it can signal growing uncertainty among workers and employers alike,” added Monroe.

Traditionally the Transpacific Maritime (TPM) conference, which took place last week, kicks off contract negotiations for US shippers, but Monroe claims there were fewer attendees this year and “there was a noticeable shift in tone,” allied to tighter budgets, he said.

“A number of companies cited the financial pressure created by tariffs, which are already squeezing margins and forcing firms to rethink spending priorities, including travel, hiring, and investment,” this will all have a knock-on effect to an economy that is essentially consumer driven, according to the consultant.

Conflict in the Arabian Gulf adds another profoundly concerning level of uncertainty, with much of the world’s manufacturing centred in Asia, including China, Southeast Asia and India, all of these regions rely heavily on energy supplied by countries in the Gulf region.

Rising energy costs, adds to manufacturing costs, while logistics costs will also increase as will congestion and a tightening of vessel space as a consequence, all these elements will add to inflationary pressures, and ultimately will see demand decline.

The effect of the bombing of Iran on the freight market was immediate, according to Monroe, as a reasonably certain market was suddenly turned into major uncertainty.

Carriers were braced for what they believed would be a very difficult year, but events in the Gulf “reshaped the conversation” with immediate effect.

“As news of the bombing spread during TPM, carriers responded almost immediately. Contract negotiations that had been underway were abruptly paused, and several carriers withdrew or suspended rate offers that had been placed on the table only days earlier,” claimed Monroe.

At what level those contract conversations will restart will depend largely on the duration of the conflict in the Gulf, and whether the Trump administration can kick-start the economy around before the start of May, when new contracts kick in.