The “freight recession” has taken its toll on the trucking industry. With volumes down and trucking and trucking-related companies going out of business, so are the industry’s employment opportunities. But there is a “qualitative shortage” for drivers that shrinks the available labor pool. Begging the question of what will happen with the next surge in demand?
The trucking industry has had its share of challenges in 2024. Inflation, geopolitical unrest, and higher operating costs have led to record numbers of trucking companies and freight brokerages going out of business in the past two years. According to industry sources, 400 trucking companies closed their doors in 2018, 400 in 2019, and 3,000 in 2020. Current figures continue to increase dramatically.
One of the factors that set the stage for these significant changes was COVID. During the first wave of the global pandemic, trucks, drivers, and certain items were in demand. There were even financial incentives for companies to enter the market at that time. The Economic Injury Disaster Loans (EIDL) from the Small Business Association (SBA) was one option that allowed new players to enter the freight market and supported companies. Trucking can be an expensive business with the cost of new equipment, facilities, and fuel. Margins can be razor-thin at companies of all sizes.
The Freight Recession and Jobs
The trucking industry is now experiencing a “freight recession,” with too much capacity and too little freight to move. A spokesperson for the American Trucking Association (ATA) said, “Volumes are down, rates are down, and operating costs are up making it a very challenging environment for U.S. trucking companies. Capacity has been slower to leave than anticipated, which has added pressure on fleets.”
Part of the dynamic regarding capacity has been companies like SAIA and Estes Express buying trucking facilities that once belonged to Yellow at a time when the trucking industry as a whole has not recovered from the current recession. By doing so, the companies are adding capacity back into an industry that already has too much capacity to balance demand for services.
With carriers lacking the needed leverage—in the form of increased demand, pricing power, and tighter capacity—there’s an emerging consensus that the market is bottoming out, with the expectation that the upper hand will eventually return in favor of the carriers.
There are many reasons for less demand for freight, but the primary one has been a combination of inflation and a significant drop in consumer spending. As of June 2024, a study conducted by the University of Michigan found that consumers are frustrated by the impact of high prices for virtually everything including fast food. The study found that 46% of consumers believe that high prices have reduced their standard of living. Consumers are also aware that a slowdown in inflation does not necessarily mean lower prices.
Many industry stakeholders are wondering when the freight recession will end, with some experts predicting that the trucking industry will begin to rebound and stabilize in Q4. However, this view is not held by all stakeholders. One study says that the timing remains uncertain with carriers facing ongoing challenges due to inflation and low volumes.
According to a report from Business Insider, the freight environment is still depressed, and market conditions have remained much weaker than previous expectations. For example, J.B. Hunt posted both a profit and sales miss for the first quarter and its stock is down 21.3% year-to-date. This is not typical of past performance by the company, one of the most successful in the industry.
The weak freight market has led to venture capital firms being more cautious about investments in logistics companies. In a report issued in early August 2024, by the consulting and research firm McKinsey, venture funding into the logistics segment fell to $2.9 billion in 2023, down almost 90% since it hit a peak of $25.6 billion in 2021. Last year’s funding level was the lowest in the sector since 2015.
“Qualitative Shortage”
Regardless of when or if conditions will improve, the reality today is that many people have lost jobs. According to an ATA spokesperson, “Trucking employment started declining year over year in June 2023 and is still declining today. In total, we have lost 35,000 jobs in for-hire trucking since last year, which lines up with the continued weakness in the freight market.”
Data from the Bureau of Transportation Statistics (BTS) reflects this trend. In July 2024, unemployment in the transportation sector was higher than overall unemployment. While there is still a driver shortage in the U.S. today, according to the ATA, “The shortage is primarily qualitative. Trucking companies are getting applicants for open positions, but those applicants are not able to be hired for many reasons including drug use and poor safety records.”
One of the issues that have led to a driver shortage in the past persists today, the aging demographic of current drivers. Many are nearing retirement age, and there are not enough younger drivers entering the profession to replace them. According to the ATA, and other sources, the average age of a commercial truck driver in the US is significantly higher than the overall workforce, indicating a generational gap in the industry.
It is challenging to attract younger drivers. The nature of the job which often means long hours away from home and the perception that truck driving is a less-than-desirable career path contribute to the issue. In addition, federal regulations require commercial truck drivers to be at least 21 years old to drive on interstate highways, which limits the pool of younger drivers who might want to begin truck driving careers when they graduate from high school at 18 years of age.
How does a stable trucking company hire the best-of-the-best truck drivers? Siplon said the key to recruiting and retaining qualified drivers is to offer better work conditions and overall compensation. He said, “If a company only has jobs that keep drivers on the road for two weeks at a time, it will be harder to recruit qualified drivers.”
Healthcare benefits and the ability to be home every night or travel with a spouse are some of the ways trucking companies can attract drivers, according to Siplon. He also explained, “Companies that can offer a guaranteed weekly minimum paycheck are in a good position to hire drivers.”
Being paid any amount of money per mile with no guarantee of the miles a driver can expect to log in a week does not help with family budgeting if you do not know how many miles you will travel in a week. “That does not put food on the table every week.”
He views trucking as a driver’s market, with carriers needing to look at recruiting as sales. He also said, “Retention does not stop once you hire a driver. With other options available, carriers must always be mindful of the needs of their drivers and their families.”
The ultimate question is what will the driver pool look like when the economy shift as volumes again increase?
Trucker Concerns
The American Transportation Research Institute (ATRI) does an annual survey of the issues most important to carriers and a separate survey identifying driver concerns. Topping the list of driver concerns in the most recent survey are driver compensation, truck parking, fuel prices, speed limiters, and detention or delays at customer facilities.
The lack of adequate truck parking is a safety risk. According to the ATA, “Truck drivers need safe, secure, and accessible parking to avoid being robbed, injured, or worse. Parking in unprotected areas can also expose drivers to crimes like assault and murder.”
Drivers must take a 10-hour break after every 11 hours of driving, and they often spend 56–58 minutes a day looking for parking. This can add an hour to their workdays and cost them an average of $4,600 per year.
Detention at a customer’s facility can also be a problem for drivers, many of whom run out of legal driving hours due to these delays. In 2019, a study conducted by ATRI found that drivers reported a 27.4% increase in delays of six hours or more. The report also stated that there was a nearly 40% increase in drivers reporting that most of their pick-up and delivery delays were due to customer actions.
Carrier Concerns
In viewing the ATRI report of concerns by carriers, the economy topped the list along with fuel prices and the cost of insurance also noted as issues of concern.
“Nuclear verdicts have been a scourge on trucking as the trial bar continues to assault the industry. These outsized and unjust awards put companies out of business and make it harder for companies to invest in safety technology and equipment,” said a spokesperson for the ATA.
The lobbying organization and its state association partners have worked diligently to enact anti-lawsuit abuse legislation at the state level to prevent what the ATA calls “predatory behavior” at the plaintiff’s bar.
Technology plays a large role in trucking today. Fleets use various transportation systems to optimize their operations, make their businesses more efficient, reduce wasted time, and cut emissions. With the government now mandating that all companies must reduce Greenhouse Gas GHG emissions to net zero by 2050 and transportation accounting for 28% of the nation’s total Greenhouse Gas GHG emissions, and over 40% tied to freight providers, companies are actively exploring strategies to reduce emissions.
As carriers and shippers recover from the difficult dynamics of the past few years, shippers will have more options, and carriers will look for innovative ways to improve all aspects of their operations, making them more resilient and better equipped to face any future supply chain disruptions.
