You are here

Economic Impact on Transportation

Economic Impact on Transportation

Freight is an important part of the transportation sector, and the transportation sector is in itself a major component of our economy. The transportation sector moves goods and people, employs millions of workers, generates revenue, and consumes materials and services produced by other sectors of the economy. The wide range of transportation services used in the economy includes for-hire freight carriers, private transportation providers, freight forwarders, logistics providers, and firms that service and maintain vehicles.

In 2002, transportation-related goods and services accounted for more than 10 percent—over $1 trillion—of U.S. Gross Domestic Product (see table).1 Only three sectors—housing, health care, and food—contributed a larger share of GDP than transportation (USDOT BTS 2004). The for-hire transportation service industries alone, not including the value of transportation equipment, fuels, and other material inputs, and the value of the in-house transportation services provided by nontransportation industries for their own use, contributed $306 billion to the U.S. GDP in 2001. Sixty-eight percent of this for-hire contribution came from the freight transportation sector (BTS estimate based on data from U.S. National Income and Product Accounts).

Transportation also contributes to the economy by providing millions of jobs. It allows men and women to earn their living by manufacturing vehicles and by driving, maintaining, and regulating them to allow for the safe and efficient movement of goods and people. One out of every seven jobs in the United States is transportation related. Transportation jobs in transportation industries as well as in nontransportation industries employed nearly 20 million people in 2002, accounting for 16 percent of U.S. total occupational employment (see table). For example, the for-hire transportation sector employed over 4.4 million workers in 2002. More than 60 percent of these for-hire workers are either in freight-related occupations or in jobs that directly support freight transportation.2 An additional 1.7 million workers are employed in transportation equipment manufacturing and another 4.5 million in transportation-related industries such as automotive service and repair, highway construction, and motor vehicle and parts dealers (USDOT BTS 2004). Transportation-related occupations also make up a significant portion of the employment of nontransportation industries such as truck drivers, freight arrangement agents, and freight-moving workers in the wholesale and retail industries. In 2002, there were about 9.2 million people employed in transportation-related occupations in nontransportation industries.3

Growth in productivity is the fundamental driving force for economic growth. Productivity growth in freight transportation has long been a driving force for the growth of U.S. overall productivity and contributed directly to the growth of the U.S. GDP. For example, from 1991 to 2000 labor productivity rose 21 percent in the overall nonfarm business sector.4 During the same time period, labor productivity rose 53 percent for rail, 23 percent for trucking, and 143 percent for pipeline. All three of these modes are primarily engaged in freight transportation. Such productivity gains result in lower transportation costs and lower prices for consumers. This brings savings to consumers and reduces business costs.

During the past few decades, continued shifts in the U.S. economy towards more services, increased production of high-value and light-weight goods, expanded trade with Mexico and China, and the current pattern of global production and distribution systems influenced trends in U.S. freight transportation. As the nation's economy shifted towards more services, the goods share of GDP declined relative to total GDP (see figure). Thirty-four years ago, in 1970, goods accounted for 43 percent of U.S. GDP, only slightly lower than the 46-percent share of services in GDP. But, by 2002 the share of goods in GDP decreased to 33 percent, while the share of services increased to 58 percent. Because freight transportation is, in general, more closely associated with goods production than with services production, the decline in goods share of GDP contributed to a slower growth in freight transportation (measured in ton-miles) than the overall growth of GDP in the past few decades. Between 1970 and 2002, U.S. real GDP, measured in 2000 chain-type dollars, grew 167 percent. During the same time period, U.S. freight transportation, measured in ton-miles, grew only 73 percent. Consequently, the freight transportation intensity of the U.S. economy decreased from 0.59 ton-miles per dollar of GDP (measured in 2000 dollars) to 0.38 ton-miles per dollar of GDP (see box).

Freight transportation intensity declined even within the goods producing sector. In 1970, it took 2.1 ton-miles of freight transportation to produce $1 of goods GDP. In 2002, it took only half that amount, 1.1 ton-miles, to produce the same value of goods GDP (in real terms). This trend reflects two underlying changes in the U.S. economy:

  • the downsizing of products towards lighter weight products (such as computers, cell phones, and hand-held digital devices), and
  • improvement in the efficiency of the freight transportation system, not only in terms of faster and timelier delivery, but also higher direct accessibility.

Although freight ton-miles grew more slowly than real GDP, it grew faster than the U.S. population, which is another factor in the growth of freight transportation as well as total transportation. From 1970 to 2002, U.S. per capita ton-miles grew 23 percent, from nearly 11,000 to 14,000. And it is still on an increasing trend (see figure). Looking ahead, the nation's freight tonnage is projected to increase nearly 70 percent by 2020 (USDOT FHWA 2003).5 General cargo tonnage is projected to more than double, and some gateways may see a tripling in freight volumes between 1998 and 2020. As the demand for freight transportation grows, so will its overall contribution to the nation's economy. And the expected growth in freight movements could result in capacity, congestion, and environmental challenges. Balancing the need for efficient and secured movement of goods with concerns for improved safety, accessibility, and mobility will likely remain a major interest of the transportation community.

See also: Transportation Services Index

1 Transportation-related purchases include all consumer and government purchases of goods (e.g., vehicles and fuel) and services (e.g., auto insurance) and exports related to transportation.

2 This share is a BTS estimate based on description of labor categories in the North American Industry Classification System (NAICS) and the Standard Industrial Classification (SIC).

3 Current data do not allow estimate of freight's share of transportation-related jobs in non-transportation industries, but freight is likely to account for a large proportion of these jobs.

4 Labor productivity is measured by the Bureau of Labor Statistics (BLS) as output per employee-hour. Output is measured by quality-adjusted ton-miles and passenger-miles for rail and air transportation and by quality-adjusted ton-miles for trucking and pipelines. See the BTS Issue Brief "Productivity Growth in Transportation" (USDOT BTS 2003) for additional information.

5 This is a projection from the 1998 base year, as reported by the Federal Highway Administration's Freight Analysis Framework.