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The Role of Transportation in the U.S. Economy

Presentation to the National Surface Transportation Policy and Revenue Study Commission June 26, 2006. The Role of Transportation in the U.S. Economy. Jack Wells Chief Economist U.S. Department of Transportation. Scope of the Transportation Sector.

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The Role of Transportation in the U.S. Economy

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  1. Presentation to the National Surface Transportation Policy and Revenue Study Commission June 26, 2006 The Role of Transportation in the U.S. Economy Jack Wells Chief Economist U.S. Department of Transportation

  2. Scope of the Transportation Sector • NIPA accounts show Transportation as 2.9% of GDP in 2004 (for-hire only) • Adding in In-house Transportation increases the total to about 4.9% • GDP produced for a Transportation purpose: 11.2% • Adding in the Household sector raises Transportation to about 18.6% of GDP

  3. Passenger-miles Ton-miles Year

  4. GDP GDP for Goods Ton-miles

  5. Transportation is particularly important to certain industries • Input-output data show transportation is • 12 % of Agricultural Fertilizers and Chemicals • 10 % of Steel and other Metals • 9 % of Coal • 8 % of Chemicals • 8 % of Motor Vehicles • 8 % of Food • High percentages of Stone and Clay, Livestock, Paper, Paints, Rubber, Lumber, and Plastics

  6. Why is Transportation Critical to These Industries? • Freight Transportation is important because of the • Weight of goods that must be carried • Distance that goods must be carried • Speed that goods must be carried

  7. Weight of Goods • Industries that use heavy inputs or outputs include • Construction (stone and gravel) • Steel and other metals • Agriculture • Energy (coal and oil) • Chemicals

  8. Distance of Goods • Industries that must move goods over great distances include • Energy (coal and oil) • Retail trade • Agriculture

  9. Speed that Goods Must be Carried • Perishable commodities • Flowers, fresh foods • Fashion merchandise • High-Technology products • High-value commodities • High value creates incentives to reduce inventory carrying costs by reducing transportation time • Pharmaceuticals • Electronics

  10. Labor Productivity Transportation vs. All U.S. Business, 1990-2000 180 160 Local Trucking Rail 140 Index (1990=100) Trucking, except local Air Transp 120 U.S. Business 100 Petroleum Pipeline 80 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Year Source: Bureau of Labor Statistics

  11. Air Rail Truck Year

  12. U.S. International Merchandise Trade and GDP 1970-2001 (In current dollars) 2,500 2,000 1,500 Index of current dollars (1970=100) Merchandise Trade 1,000 500 Gross Domestic Product - 1970 1975 1980 1985 1990 1995 2000 Year Source: BTS, based on BEA data

  13. “The greatest improvements in the productive powers of labor . . . seem to have been the effects of the division of labor. . . . The division of labor is limited by the extent of the market.” -- Adam Smith, Wealth of Nations, 1776

  14. Domestic Freight Ton-Miles by Mode 1991-2001 1.8 1.6 Air Railroad 1.4 Truck Index 1991 = 1.0 1.2 Oil and Gas Pipelines 1.0 Water 0.8 0.6 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Year Source: Bureau of Transportation Statistics

  15. Average Hourly Earnings - Transportation vs. Total Private Sector 10 Transportation and Public Utilities 9.5 9 8.5 1982 Dollars 8 Total Private Sector 7.5 7 6.5 6 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Month/Year Source: Bureau of Labor Statistics

  16. Source: Texas Transportation Inst

  17. Congestion Costs are Growing Faster than GDP • Since 1982, the cost of congestion has grown at 8 % per year, more than double the rate of growth of the economy • In 20 years, continued growth at this rate would bring the cost of congestion to $890.5 billion • Equal to 4.3 % of GDP

  18. Congestion is Growing Faster in Rural Areas and Small Cities • Congestion has traditionally been an urban phenomenon • But congestion is growing most rapidly in rural areas • From 1992 to 2002, traffic per lane-mile grew • 35 % on rural interstates • 21 % on urban interstates • Rural congestion particularly affects freight

  19. Congestion is growing more rapidly in smaller cities • TTI found congestion costs grew from 1997 to 2003 – • 24% in Very Large Cities • 26% in Large Cities • 36% in Medium Cities • 56% in Small Cities

  20. Highway Railroad Motor Vehicles Other Industries

  21. All Levels Federal Highway

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