Trucking Employment Is Contracting The Fastest On Record This Century

Rob.. both.

I've been studying this current situation, and I am curious about what is actually causing the current issues in trucking. The answers I find others pointing to are all over the place. It makes no sense to me. You can't just blame it on the brokers or the large carriers. I don't even think we can lay the blame at the door of the companies shipping their products. This business is complex. It seems simple to folks outside of the industry, but it has evolved into it's own self adjusting eco system that keeps itself running at certain levels of efficiency.

I honestly think we have to blame our current problems on over capacity. That is a simplistic sounding statement, but it involves a lot of factors that put us into this particular situation. One of the things most of us company drivers don't really pay attention to are the market forces going on behind the scenes. Those forces affect our jobs, and they are very volatile at times. There is a lot of haggling and hand wringing going on right now concerning rates. Everybody wants the best rates. Shippers want them low. Carriers want them high. The brokers are in the middle of this struggle doing all they can to make it work to their advantage. But the elephant in the room, causing so much of the current problem, is over capacity.

We have record numbers of trucking companies closing their doors. That should diminish the problem of over capacity, but it isn't having any effect. What gives? The economy is contracting also. Shippers aren't shipping nearly as much as they were. We are hit with a double wammy. As quickly as carriers are disappearing, freight seems to be disappearing too. That is a real problem. These are the complexities of this business that a company driver doesn't have to deal with. He does feel their effects, but he doesn't have to figure out how to solve those problems. He works efficiently and hopes his dispatcher can keep feeding him enough work to stay in the game until things turn around. And they will eventually.

We are going to see brokers focusing on the contract markets because they see that as a way for them to make the most money. Shippers are going to want to focus on the spot market because they see that as the way to save the most money. This will cause the spot rates to begin rising and the contract rates to stay flat. That is because brokers will have locked in prices on the contract rates while shippers will inadvertently be causing the spot market to increase. That is going to hurt the brokers, and they are already hurting pretty bad right now. I think we will continue to see some of these large 3pl companies fall out of the market place.

We will continue to see carriers dropping out too. It is just a tough market these days. The way I see it, the carriers who survive are the ones with plenty of cash on hand and a good efficient track record of operations. Hold on tight and stay the course. The owner operators are really in a tough spot right now. We will always have plenty of them, but it will only be the wise and the strong who survive this next 18 months or so.

O/S you hit the nail on the head. FMCSA has articles in circulation on the numbers of authorities that have been issued and how many are closing down. They are big numbers.

Also a ton of folks jumped in the broker pool making it over capacity as well. They are all getting into bidding wars over freight, keeping the prices low. Alot of O/O’s have been pulling that stuff and brokers had no incentive to change. Lately brokers have not been able to cover alot of those.

Both truck capacity and broker capacity will self correct eventually, but with the large numbers in this current economy it will take a considerable amount of time.

Alot of brokers are assest based with basically borrowing on their contracts for operating money. With the higher interest rates that is putting alot out of business. Most all that have made the news lately used that model.

My best advise to everyone is to be smart in your spending and ride it out.

I’m a solo reefer company driver for Prime in a LWT Cascadia. No training. This is my solo mileage history from May ‘22 to Nov ‘23

Average Miles

May/Jun 22 28 days; 10,119 mi; 2,530 mi/wk

Jun/Jul 22 31 days; 11,486 mi; 2,593 mi/wk

Off work 4 months due to injury

Dec/Jan 23 37 days; 11,167 mi; 2,113 mi/wk Weather & truck repair downtime

Jan/Feb 23 33 days; 12,872 mi; 2,730 mi/wk

Mar/Apr 23 32 days; 11,150 mi; 2,439 mi/wk

Apr/May 23 29 days; 9,820 mi; 2,370 mi/wk Freight slowdown, loads have extra time

May/Jun 23 30 days; 10,055 mi; 2,346 mi/wk

Jun/Jul 23 30 days; 10,507 mi; 2,452 mi/wk

Jul/Sep 23 41 days (7/25-9/4); 15,040 mi; 2,567 mi/wk

Sep/Oct 23 26 days (9/11-10/7); 9,238 mi; 2,487 mi/wk

Oct/Nov 23 31 days (10/13-11/12); 12,391 mi; 2,798 mi/wk (best yet)

I’m on pace to gross ~$74k for 2023.

I heard recently that our reefer division is down about 400 trucks now compared to the peak in November 2022. Trying to keep driver revenue as high as they can. It was stated that 2022 was a record year for trucking. This year is closer to 2018-2019.

I suspect that BK’s 400 truck company compared to a Prime with 9,000+ trucks is easier for them to balance available loads to drivers. Big operators have to spread the work around to give everyone something.

An 8 years veteran like Kearsey is going to get consistently more miles than a newbie like me.

I saw a news report recently that Tyson is opening its first plant to process bug protein.

BK can haul dead bug rather than dead cow in the future.

PS. I averaged 63.6 CPM for last 6 months and 64.2 CPM for last 3 months after some pay rate increases

A little theoretical bend on things, it doesn't make much of a difference on day to day life for us, but what if....

It's definitely obvious that we're over capacity. One could reasonably argue that we've been over capacity since deregulation occurred. It benefits the shippers which is actually manufacturing and retailers.

I believe that it was intended. At the time, economists and lobbyists saw it as a tool to lower inflation. By flooding the marketplace with destructive competition, it lowered the cost to ship everything, which is retailers Achilles heel, and drastically changed the economy from on demand to one of scale. It consolidated sales of virtually everything from the hands of many into the hands of a few. It gave rise to the birth of the box store and the conglomerate mega corporation. The consumers benefited with access to cheap products, insanely cheap, but at the cost of a nostalgic America.

Again, I may be considered a conspiracy theorist type, but I recently read that Goldman Sachs chief economist said that his metric for us avoiding a recession (which is false, we're currently in one for day to day costs) is that shipping costs were low and getting lower, essentially. It doesn't take much to draw a line between that and guessing that the current state of the trucking industry may not be caused by completely organic events. Some reasons are genuine but some are not. It definitely benefits retailers, if they could get raw goods and products shipped for free, they would in a heartbeat.

If the retailers can find a way to keep the cost to ship at its present rate, I believe they will do everything in their power and Washington's power to do so, even if freight volume returns. If they can restructure how shipping is performed and the cost, an entire market change, they will. They are drunk on cheap abundant shipping.

I have a friend that has a substantial sized e-retail business with a few warehouses. His worst, by far, costs and problems are shipping and recieving. He said that if he could find a way to get it shipped for free he would no matter the cost.

I think the over capacity is engineered in many ways. I think the current ratio of shedding capacity to shrinking freight volume is not enough. If retailers can throttle their freight volume and make up for it with higher prices, which consumers have shown they will pay, they will continue to do so. If too many go out of business too quickly, then things will start to turn around. I also think that the government and retailers would like to see common freight consolidated in the hand the hands of a few large players, much easier to control.

To understand the current circumstances, you must appreciate the once-in-a-generation events that somehow just keep happening.

• We had an unprecedented closure of our entire society for extended periods of time
• The closure funneled all spending to a tiny number of corporations
• This created massive small business failures and massive supply chain shocks for large corporations at the same time.
• You had over 100,000 small businesses go under, while a small number of large corporations had an overwhelming demand for their products
• The Federal Reserve printed 40% of all money ever put into circulation in a two-year period
• The government handed out over $1 trillion dollars as "helicopter money" to the general population - unprecedented
• This administration then stepped in and shut down our energy production, spiking energy prices
• The combination of super high energy prices, huge amounts of money printing, helicopter money, areas of extremely high demand, and supply shocks all contributed to runaway inflation
• Now the Federal Reserve has raised interest rates at the fastest pace in our country's history
• Now the supply chain shocks have lessened, consumer demand has dropped, and inflation is beginning to slow because the economy is feeling the effects of high inflation and higher interest rates

The fact that any trucking companies have survived this mess is impressive in itself. Just a few years ago, you had historically low inflation, unemployment, energy prices, and interest rates. Then, within a couple of years, you had historically high inflation, energy prices, and soaring interest rates.

The only thing holding this economy together is the trillions of dollars the Fed printed and distributed in recent years. Almost our entire economy is government-driven at this point. Myself, and people much smarter than me when it comes to this stuff have no idea how this will ultimately play out.

Overcapacity

To understand capacity in trucking or in any commodity or commodity service, you must understand there is a delay as capacity within our economy adjusts to changes in the business cycle. It takes time for an increase or decrease in demand to filter through the economy. The trucking industry doesn't instantly react to changes, keeping capacity perfect all the time.

As demand drops, trucking companies are reluctant to shrink their capacity, so they look for other ways to maintain their fleet size and push through the drop in demand, knowing they'll be in a strong position to take advantage of the next strong cycle.

By the time they throw in the towel and reduce their fleet size, it's often too late in the cycle and the economy has begun to swing to the upside again. The company will soon reverse that reduction in capacity as they realize they're missing out on opportunities.

So, trucking capacity always lags behind supply and demand. There's always too little capacity in the early stages of increasing demand, and too much capacity in the early stages of decreased demand. Right now we're in the stage where demand is decreasing, but capacity has not reacted enough yet.

Also, keep in mind there are humans making these decisions, and humans are susceptible to fear and greed. When times are good, people get greedy and push hard for more. They often push right through the early signs of a slowdown and maintain too much capacity for too long.

During downturns people become fearful and conservative, often remaining that way even through the early stages of increased demand. So by the time they become aware that demand has picked up enough for them to become greedy again, they're once again behind the curve.

Davy, I love conspiracy theories. All conspiracy theorists are welcome here. But in this case, I think trucking is one of the least manipulated industries in the US and what you're seeing is a classic example of supply and demand business cycles and the nature of a commodity service. At the same time, the distortions are greater because of the unprecedented shocks to our system we've experienced in the past few years.

At this point, no one knows what happens next, and I mean no one, because we've never experienced anything remotely similar to the economic shocks of the past few years. We are living through an economic cycle that is more manipulated by the government than at any time in our history. In fact, the government was the cause of everything we've been through in the past few years. Unfortunately, history does not have good things to say about government intervention in economies. I'm highly concerned about what will happen next, but only time will tell.

Brett, all I can say is WOW. What an astounding list of facts and factors.

What especially jumped out at me was the Federal Reserve printing 40% of all money ever in circulation in a two year time span. That is so mind boggling that the significance of it is hard to grasp by the human mind, at least my simple mind.

The one thing I would venture to add to the mix would be the tax cuts for the wealthy enacted under both the Bush and Trump administrations. Also, what did the Iraq war cost? 2 trillion dollars?

Your list alluded to the stratification of wealth during the past two decades. When wealth is so concentrated among so few, the result is the government making up the shortfall by printing more money, which is just kicking the can down the road. It is a disaster waiting to happen.

If one would read the classic book, “The Rise and Fall of the Roman Empire”, it would be obvious that there are many similarities between the demise of that society and ours.

Trucking may expand and contract but it will weather the stormy seas because goods will always need to be moved long distances and the wagon and team of horses will not suffice anymore.

Very well laid out Brett. Thank you . Most company drivers never see this side of the industry, but I think it is helpfull for them to have a basic understanding since we are in this period of time.

I completely agree with everything Brett laid out. We are in unprecedented times. Things are taking place that we have never experienced before. We just don't know what may happen.

My business background tends to cause me to theorize about business and how it will unfold. I don't recommend any of you take my comments as business advice. I see over capacity as a huge issue right now. Brett laid out a beautiful display of why we are here. He also said this about over capacity...

trucking capacity always lags behind supply and demand. There's always too little capacity in the early stages of increasing demand, and too much capacity in the early stages of decreased demand. Right now we're in the stage where demand is decreasing, but capacity has not reacted enough yet.

I want to preface what I am about to say with the fact that I know I am an eternal optimist. I have to be careful about that personal leaning. It has led me astray before, but I can't help it, that is just how I am wired.

I am anticipating a quicker recovery than many seem to be forecasting. My reasoning is based on what is going on with these large brokerage houses failing so quickly and unexpectedly. Brokers have always had the image of being a parasitic component of the trucking industry. Most people consider them as gouging the rest of us, and making a killing while doing what they do. Now we find they aren't really set up to take the heat that is generated in the kitchen.

They have gotten sophisticated with their software and their ability to handle a lot of freight transactions. Tech savvy people have jumped on the bandwagon and tried to garner much of that market share. Right now we are witnessing some of the large players fold up and crash. These were the folks who were supposed to be making a lot of money. Now the curtain has been pulled back. We find they were operating off of borrowed money and the higher interest rates are killing them. We've had people scoff at us here over the years when we talk about the tight operating ratios in trucking, but we are being proven correct by the current circumstances. It is very easy to quickly get upside down in this business.

This is just my opinion, but I think if we see some more of these large brokerages crash and burn, the attrition rate itself will help us to a quicker recovery. Much of our overcapacity right now is being caused by the brokers. They are in a really tough spot right now. As trucking companies and brokerage houses fall like a house of cards, we should see a reckoning of the problems with over capacity.

Again, I am speculating and I do not recommend anyone take my ramblings as business advice. I have been wrong so many times that you would be foolish to follow anything I say as good prophetic insight.