Freight market update, 25 September 2023

Joby Aviation’s Role in Freight Innovation

In a strategic move poised to revolutionize urban transportation, Joby Aviation, a pioneering company in electric vertical take-off and landing (eVTOL) aircraft, has selected Dayton, Ohio, as the home for its primary aircraft production facility. This decision connects Joby's cutting-edge eVTOL technology with the historic birthplace of aviation, famously associated with the Wright Brothers.

A Legacy of Innovation and Growth

The new facility, situated near the Dayton International Airport, holds ambitious objectives. It is projected to have the capacity to produce up to a staggering 500 aircraft annually and promises to create approximately 2,000 high-skilled jobs, a significant boon for the local workforce. Joby Aviation is fully committed to this venture, with plans to invest up to $500 million in the project. This investment will be further complemented by state incentives and the potential backing of the U.S. Department of Energy.

Honoring Aviation's Pioneers

Speaking about this remarkable milestone, JoeBen Bevirt, the Founder and CEO of Joby, aptly acknowledged the historical significance, stating, "We’re building the future of aviation right where it all started, in Dayton, Ohio." The choice of Dayton not only pays homage to aviation's pioneering Wright Brothers but also solidifies Joby's mission to usher in a new era of aviation that is quiet, efficient, and environmentally friendly.

Aircraft Designed for the Future

Joby's eVTOL aircraft, the cornerstone of this visionary enterprise, is engineered to carry a pilot and up to four passengers at speeds reaching 200 mph, offering a substantial range of 100 miles. What sets this aircraft apart is its "revolutionary quiet noise profile," making it virtually imperceptible against the urban soundscape. This innovation is poised to redefine urban transportation as we know it.

Global Impact on the Horizon

Joby Aviation's vision extends globally. They plan to leverage their cutting-edge eVTOL aircraft to create aerial ride-sharing networks in cities across the world, with the ambitious launch date set for 2025. Collaborative efforts with industry giants like Delta and Uber underscore the far-reaching implications of this venture.

The Bank of Canada on productivity and inflation

Canada's persistent productivity decline over the past three years poses a challenge for the Bank of Canada's efforts to curb inflation. Despite expecting productivity to rebound during the post-COVID-19 recovery, it has fallen in eleven of the last 12 quarters, returning to 2016 levels.

This productivity slump not only hinders economic growth but also contributes to rising unit labor costs, a significant factor in inflation pressures due to higher wages.

Bank of Canada Governor Tiff Macklem acknowledged this issue, stating, "Weak productivity growth has been a recurring problem in Canada." This assessment followed the bank's decision to maintain its benchmark interest rate at a 22-year high of 5%, signaling a period of slower economic growth.

The central bank's forecast of a return to the 2% inflation target by mid-2025 faces challenges, especially after August's inflation surged to 4%, driven by higher gasoline prices and a 5.2% annual wage growth rate.

Derek Holt, head of capital markets economics at Scotiabank, highlighted that rapid wage gains do not correlate with productivity growth, which has been plummeting.

The rise in unit labor costs presents a dilemma for the economy: businesses may reduce their workforce to protect profits, or monetary policy could tighten further.

Money markets are anticipating another rate increase by the Bank of Canada in the coming months, with a transition to easing expected by the end of 2024, albeit at a slower pace compared to the Federal Reserve.

While Canada has experienced record levels of immigration, bolstering economic growth, per capita GDP growth remains lower than in the United States. Investment levels per worker are also significantly lower, with Canadian businesses investing 55 cents per worker compared to every dollar invested in the United States in 2021.

Structural factors further impede productivity, including Canada's vast geographical size, leading to higher transportation costs, a prevalence of small businesses that invest less, and the presence of oligopolies that reduce competition in sectors like banking and telecommunications.

The overarching concern is that with stagnating productivity in recent years, all wage gains may ultimately translate into price increases, intensifying inflationary pressures, warns Doug Porter, chief economist at BMO Capital Markets.