Trucking industry insiders and analysts have warned of elevated risk of trouble for the industry in coming months, as low trucking spot rates and diminishing demand for goods lurk on the horizon, boding ill for trucking companies and their employees.
While much of the economy reels from a shortage of labor, the trucking industry is unique in that there is seemingly not enough work available for independent truckers, as the industry appears to maintain a capacity significantly outpacing the present demand.
This downturn in demand may be attributable to reduced consumer spending, which appears to be receding after two years of higher-than-usual pandemic-era spending.
At the same time, the trucking industry is left with a capacity that has been built up in recent years to meet high demand and address the complications that have befallen supply chains during the pandemic and post-pandemic era.
“As long as the market has excess capacity, freight rates will remain depressed. It will take a substantial purge of capacity before spot market carriers can expect relief,” writes FreightWave CEO Craig Fuller.
The last major crash for the trucking industry occurred in 2019, at a time when rates were similarly low. However, a major feature distinguishing today’s industry from that of 2019 is higher operating costs, driven by fuel price inflation and higher wage costs. According to a recent report from loadboard Truckstop.com, it is now 51 percent more expensive to run a trucking company than it was last year.
Throughout 2021, the trucking industry found itself with a labor shortage that put the system under strain to meet demand, with many of the supply chain issues persisting to this day. In the two years immediately following the initial lockdowns from the CCP (Chinese Communist Party) virus, economic stimulus and low interest rates were responsible for high consumer spending and demand.
However, consumer spending has fallen in recent months, and as retail companies adjust their expectations to account for lower consumer confidence, trucking companies are facing lower trucking rates. Since last spring, analysts have studied low trucking rates as a possible sign of an imminent recession, which has been rated by experts as more likely in the subsequent months.
These diminishing near-term prospects for the trucking industry are accompanied by what some analysts have described as the “Great Purge,” an ongoing process driving independent truckers out of the industry as the circumstances for drivers become more onerous.
Some industry experts believe that one of the primary challenges facing the trucking industry is to make work more desirable for independent truckers, whose fortunes have declined over the decades in tandem with union power. These same truckers now face an elevated threat of job insecurity, as the imbalance between labor supply and shipping demand can result in many truckers forced to waste time for want of jobs.
“The trucking demand’s sharp decline is merely a symptom of a larger problem; the industry has a shortage of good pay and consistent work rather than drivers,” Priyesh Ranjan, CEO of logistics automation company Vorto, told The Epoch Times. “Inefficient technology creates idle time and deadhead miles, leading to low pay and driver dissatisfaction. On average, drivers aren’t working for almost 40 percent of each tour. Improving the issues that define the job experience in trucking will make the career path more appealing.”
With so many factors conspiring at once to make work difficult for truckers and company owners, it appears more likely by the month that there is trouble on the horizon for the trucking industry. While the solutions to these problems vary among experts, there is an emerging consensus that the coming months or even years will be challenging for the integral business of trucking goods to circulate through the economy.