U.S. payroll growth slowed, adding only 22,000 jobs in August, the lowest since December 2020. Unemployment was 4.3% in August, still low, but the highest since October 2021, nearly four years ago. Initial jobless claims edged slightly higher. Recognizing that the labor market drives consumer spending (accounting for 70% of the U.S. economy), the Fed, on September 17th, moved to lower interest rates by a Quarter Point to a range of 4% to 4.25% and projected two additional rate cuts for the remainder of this year. This sets the stage for growth: activities in the Aero and Rail investment markets are likely to rise as consumer spending and business investment are driven by expected additional rate cuts and cash tax savings from bonus depreciation generated from the July 4th tax legislation.
Less regulation will foster economic growth (the EPA has moved to repeal a 2009 declaration stating that greenhouse gases[1] pose a public threat, saying the finding was “unduly pessimistic”). Foreign manufacturing companies are responding to the Administration’s drive to revive U.S. manufacturing, creating jobs and implementing new technologies. Hitachi Rail opened a new carbon-neutral railcar manufacturing facility in Hagerstown, Maryland, on September 8th (the factory uses AI and other digital technologies for enhanced production). It’s part of Hitachi’s $1 billion investment in U.S. manufacturing. South Korea based JS Link plans to establish a rare earth permanent magnet manufacturing facility in Columbus, Georgia, to accelerate production capability for rare earth permanent magnets in the U.S. U.K. based GKN Aerospace is expanding its facility in Newington, Connecticut by adding a production line focused on Fan Case Mounting Rings (FMCR) which connect Pratt & Whitney’s GTF engine to the aircraft’s pylon on the A220. A new bill has been introduced in the U.S. Senate: “Halting International Relocation of Employment” (the HIRE Act) which seeks to discourage American companies from outsourcing jobs overseas and includes a 25% tax on payments made to foreign firms for services used by American customers, a ban on deducting those expenses from taxable income, and the creation of a Domestic Workforce Fund to support training and apprenticeships in the U.S. The combination of new manufacturing projects and supportive legislation significantly bolsters the outlook for aero and rail investment.
For the first 38 weeks of 2025, U.S. railroads reported a cumulative volume of 8,423,372 carloads, up 2.2% from the same point last year, and 10,289,962 intermodal units, up 3.6% from last year. Total combined U.S. traffic for the first 38 weeks of 2025 was 18,713,334 carloads and intermodal units, representing a 3.0% increase compared to the same period last year. Delta’s fall revenues are expected to be stronger based on booking trends and commentary from executives. At the Morgan Stanley Laguna Conference[2] Glen Hauenstein, President of Delta Air Lines, Inc., remarked: “We’re seeing very strong domestic corporate demand into the fall. We had our highest post-pandemic corporate sales number of any day in any week this September. Bookings for both corporate and high-yield leisure are doing incredibly well. October has become a peak month for transatlantic travel. Domestic capacity rationalization has occurred, and demand trends are improving.” These strong performance metrics confirm the growing opportunity in aero and rail investment.
The Rail Customer Coalition (“RCC”), initially formed in 2015 as Consumers United for Rail Equity (“CURE”), a group of freight rail shipper associations (manufacturers, agricultural producers, and energy companies), are asking for a thorough review of the proposed UP/NS merger and advocating the STB impose conditions that ensure “actions to enhance competition, service, and supply chain stability.
Second quarter GDP growth was revised up to 3.8%. Value appreciation of aircraft (and engines) is accelerating. Policy and tax uncertainty are clear. Investment momentum is improving. To hit your Fourth Quarter targets and capitalize on the current momentum in aero and rail investment, benefit from deep industry experience. Call RESIDCO.
Glenn Davis 312-635-3161
[1] Less emphasis on carbon emissions will allow air carriers to continue to operate of existing midlife equipment.
[2] Morgan Stanley Laguna Conference, September 11, 2025.
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