Behind the Driving Increase
The Federal Highway Administration reported that driving increased 1.7 percent between 2013 and 2014 in the United States. This compares to virtually no increase over the period from 2004 to 2013. The 2014 increase will come as a disappointment to those who have perceived that the flat driving volumes of recent years signaled a shift in preferences away from driving. It had even been suggested that America had reached "peak car."
Despite the congruity of such sentiments with urban planning orthodoxy, it’s somewhat risky to divine future economic trends from the perspective of a weak economy. It is rather like predicting future employment trends from realities of the late 1930s, when the world had still not climbed out of the Great Depression
The problem for those who seek to replace the car is that the current form of cities, from Phoenix to Paris, requires cars to support the millions with middle-class standard of living. Of course, with a sufficient decline in the standard of living, cars could become less essential. After all, you don’t need a car to not go to work when you are unemployed.
Nor is “peak oil” coming to rescue; we now live in something more like an oil glut. Even when prices were soaring, the amount of driving barely changed. People may have shifted to more efficient cars, they didn't give up their cars, they just drove a little bit less.
The latest driving data may indicate that even the somewhat tepid recovery is speeding up in the United States. This combined with falling gasoline prices is likely to be why driving is increasing again.
Employment Exceeds 2008 Level
Employment is probably the most important factor in the recent recovery of car use
According to data at the St. Louis Federal Reserve Bank "FRED" website, national employment peaked at 138.3 million in January 2008. By early 2010, employment had dropped to under 130 million. It took until April 2014 to restore the employment level that had been previously achieved more than six years earlier. This was the longest employment trough since before World War I, except for the period of 1929 to 1936, during the Great Depression.
As more people return to employment and incomes rise, driving can be expected to increase. During 2014, the nation's nonfarm employment rose to the highest level in history. As the year progressed and employment increased, so did driving (Figure 1).
But there is still a long way to go for the economy. The civilian labor force participation rate continues depressed. If early 2008 levels of labor participation were restored, there would be at least 10 million additional jobs.HT: Ritholtz@Bloomberg
Falling Gasoline Prices
US Department of Energy data indicates that the average price per gallon of gasoline rose by more than one half between 2005 and 2011. Until the middle for 2014, gasoline prices fluctuated around this level until early summer of 2014. Then the gas price reductions began. By the end of 2014, gasoline prices had dropped to near 2005 levels, which they actually reached in early 2015. Much of the 2014 increase in driving was concentrated since the decline in gasoline prices started in the last half of the year (Figure 2)....MORE
