- The freight industry is in the midst of a downturn that began in October 2018.
- The freight industry goes through a full industry-specific business cycle every four years, with the typical freight recession lasting roughly ten months.
- While freight industry downturns frequently precede macroeconomic downturns by several months, only approximately half of freight industry downturns in the last four decades have spilled over into the larger economy or coincided with a macro recession.
- When freight recessions do not coincide with broader economic downturns, they are considerably more brief, lasting only seven months on average.
Anyone who has spent enough time in the freight sector has experienced its ups and downs. The most well-known headline metrics in the business truck rates, shipments, and truck orders demonstrate a clear cyclicality.
This is unsurprising in some ways. The broader economy also follows a cycle, with periodic booms (expansions) and busts (recessions), which economists refer to as the business cycle. The freight industry is sensitive to macroeconomic ebbs and flows since it provides a service to businesses and consumers.
However, the freight industry has its own rhythm that is separate from the broader business cycle, which we refer to as the freight industry business cycle.
A recession does not have a common definition. The National Bureau of Economic Research (NBER), a non-profit that is largely regarded as the most authoritative judge of the business cycle in the United States, makes the decision based on somewhat subjective thresholds applied to a variety of economic variables.
Expansions occur when the economy is expanding, and recessions occur when the economy is contracting. In practice, recessions are usually thought of as a brief period of diminishing economic activity that begins with two consecutive quarters of dropping real Gross Domestic Product (GDP).
This bird’s-eye view ignores more nuanced economic situations that still cause genuine havoc for businesses and individuals, such as regional or sector-specific contractions, short-term contractions, and activity slowdowns that do not result into outright contractions. One example of a sector-specific pattern of expansions and contractions is the freight industry business cycle.
We employ the same approaches used to model the broader economic business cycle to identify the freight industry business cycle.
We create a Freight-Weighted Industrial Production index based on seasonally-adjusted factory output and retail sales that takes into account differences in the types of goods that come out of U.S. factories and the types of goods that travel on the country’s freight network, rather than using the aggregate output measure (real GDP) to identify the macroeconomic business cycle. (See the associated Freight Research article “Identifying the Freight Industry Business Cycle” for more information on how we did this.)
The Freight-Weighted Industrial Production index can then be used to identify turning points: When the index rises, the freight economy is growing; when the index falls for six months or longer, the freight economy is in decline.
The Freight-Weighted Industrial Production index is shaded in the chart below for months when the entire economy is in a recession, the freight industry is in a recession, or both are in a recession.
Is trucking affected by the recession?
Consumer demand has slowed dramatically, devastating the nation’s trucking companies and causing employment losses to be higher than at any point since the series began in 1990.
What is the state of the trucking sector in 2021?
According to the firms, freight volumes are expected to increase in 2022 as goods output recovers and more products flood the market. However, they warned that while intermodal capacity will help compensate for lower truckload capacity, freight demand will be erratic in 2021. Finally, they cautioned that e-commerce and customer expectations for quick delivery would continue to influence freight costs and capacity availability, so shippers should plan for many scenarios.
What does the trucking industry’s future hold?
According to Redwood Logistics, trucks transport almost 70% of all commodities exported in the United States, and this figure is predicted to rise by 3.4 percent per year until at least 2023. This increased demand, along with fewer young people choosing truck driving as a vocation, has resulted in a nationwide scarcity of 51,000 truck driving jobs.
What is the situation of the trucking sector right now?
The trucking business in the United States is vital to the country’s economy. Almost every good consumed in the United States is loaded onto a truck at some time. As a result, in 2019, the trucking industry hauled 72.5 percent of all freight transported in the United States, or 11.84 billion tons. In the same year, the trucking business was worth $791.7 billion, accounting for 80.4 percent of the nation’s freight bill. More information can be found here.
COVID-19
Our COVID-19 Hub provides the most up-to-date information, guidance, and resources to assist our members and other stakeholders in the industry in navigating the current pandemic. Click here to get to the Hub.
What industries are the most recession-proof?
Healthcare, food, consumer staples, and basic transportation are examples of generally inelastic industries that can thrive during economic downturns. During a public health emergency, they may also benefit from being classified as critical industries.
Why has the trucking industry slowed?
The most common request Mickey Weaver receives from potential truck drivers is to be able to return home every night. The second thing they want is money, but it’s odd, he continues, because many people are prepared to forego the money in order to remain at home every day. But that’s a tall order. “Weaver said, “I can get you money any way you want it.” “I’ve got 40 ways from Sunday to hook you up on that if money is all you care about and you don’t care where you’re driving or when you’re going out.”
Weaver, who is based in Arkansas, is the owner of two companies, We Hire Truckers and Truck Jobs 4 U, which, as the names suggest, recruit truck drivers for open employment. He began this work shortly before the epidemic; hiring halted in March 2020, but resumed in the fall of that year. There are plenty of job openings right now. “I have more tasks than drivers,” he explained.
According to the American Trucking Associations, there is a shortage of more than 80,000 truck drivers in the United States. The American Trucking Association estimates that trucks handle nearly 72 percent of all freight in the United States, demonstrating how reliant consumers are on the truckers who deliver turkeys to supermarkets, gas to pumps, and Christmas presents to your doorsteps.
This isn’t simply a problem in the United States. Trucks transport equal amounts of freight in areas like the European Union and China, and driver shortages are affecting governments and regions all around the world. In a survey of 800 transport businesses from more than 20 countries, the International Road Transport Union found shortages. According to the poll, roughly 20% of positions in Eurasia went empty last year.
This isn’t a new issue, either. For years, analysts and industry groups have warned of a global shortage of truck drivers. However, supply chain interruptions during the pandemic and surges in demand in places like the United States have exacerbated this long-running dilemma.
The outbreak of the pandemic “It’s like opening Pandora’s box on so many issues,” said Jean-Paul Rodrigue, a Hofstra University expert in transportation, logistics, and freight distribution.
“The capacity has been pushed thin as a result of the heavy pressure, and as a result, there are delays and a slowdown,” he continued. “All of this has a cascade effect, making the driver shortage much more acute than before.”
The reason why everyone seems to require more truck drivers is a little more difficult, and it differs by country, where legislation, wages, labor conditions, and infrastructure all have an impact on the job. The labor scarcity is also a reflection of broader economic developments, as worker demand is outstripping supply, particularly in the United States.
People constantly want to get out on the road, according to Weaver. They are, however, more picky these days, as they can be. “There are so many employers out there that basically much call you and say, ‘I want ABCDEFG, and if you can’t hit all of those, then I’m not interested in that one,” Weaver explained.
All of this combines to make less and fewer individuals desire to be truck drivers or stay in the industry long enough to replace an aging workforce around the world. Long-haul traveling, in particular, can be taxing, with long wait times that aren’t rewarded and additional expenses associated with being on the road for long periods of time. “Why aren’t more people interested in becoming truck drivers? That is the scenario, or the problem’s source. “And the reason for that is that it’s a dreadful work,” Hanno Friedrich, associate professor of freight transportation at Khne Logistics University, explained.
Dynamics are different around the world, but the difficulty of being a truck driver (especially in the Covid era) is universal
Experts say the first thing to understand about the truck driver shortage is that there isn’t really a shortage. “It’s a recruitment and retention issue,” said Michael Belzer, a Wayne State University trucking industry expert.
In the United States, “There are millions of truck drivers with commercial driver’s licenses who aren’t driving trucks and aren’t using their commercial driver’s licenses, far more than we need,” Belzer stated. “That’s because people have been recruited for this position, and possibly paid to be taught for it, only to conclude, “This is not for me.” This isn’t going to cut it for what I’m doing.’
It’s difficult to bring individuals into the industry, especially young people, when it comes to recruitment. There’s usually a gap between when people graduate from high school (say, at age 18) and when they can legally drive a truck across state lines (usually at age 21), which means those people may already have jobs and won’t be wooed away to become truckers.
Other barriers to admission include the need for schooling (which can be costly) and the ability to earn a particular class of driver’s license. Covid-19 lockdowns caused training and testing for truck drivers all across the world to come to a halt. Because of safety issues and limited accommodations along routes and at rest breaks, the sector has a hard time attracting women to work in it.
However, truck driving is no longer the same job it once was. For example, in the United States, trucker earnings have been declining for years due to deregulation of the sector, which began in the 1980s and intensified in the 1990s, coupled with the loss of unions. However, the work itself hasn’t changed much. It entails long hours, with a significant portion of that time being unpaid. “You may wait all day or all night at a port site to get a shipment offloaded and loaded up, and you’re not getting compensated for any of that time,” said Matthew Hockenberry, a Fordham University professor who studies global production media.
This not only contributes to the recruitment issue, but also to the retention issue. Truck drivers are exhausted. Great-haul truckers, in particular those who transport freight over long distances or between states are often paid by the trip, and they must go where the cargo needs to go, with little flexibility over when and where. “As Weaver phrased it, “the path is the road.”
Anything that happens along the road a flat tire, an accident, a traffic jam can derail the process, and the truck driver is generally the one to figure it out. This puts additional strain on owner-operators (truckers who also own their cars) or those who get into lease-purchase agreements in areas like the United States (paying toward eventually owning a truck). Drivers’ capacity to pay off their truck, let alone generate a reasonable salary, may be limited as a result of these difficulties.
Some of these developments were amplified by the epidemic. According to a 2018 report, the typical truck driver used to wait approximately 2.5 hours at warehouses, but closures during Covid-19 and supply chain delays have made that even more unpredictable.
The transportation workforce is aging all across the world. According to a 2019 research from the American Trucking Associations, the average age of a truck driver in the United States is 46. It’s 44 all over Europe. Heavy-goods vehicle drivers in the United Kingdom are on average 53 years old. Some of these people are nearing retirement, and the fear of being ill, as well as the uncertainties and early slowdowns of the epidemic, hastened their exit from the industry.
“Consider the start of Covid, when everything was turned off. Because those sites were shut down, an over-the-road truck driver couldn’t even take a bath, have a meal, or do a lot of other things,” said Martin Garsee, executive director of the National Association of Publicly Funded Truck Driving Schools. “So, if you’re on the verge of deciding how you’re going to retire, what would you say if you could? Or if you could find something else to do?”
And, for all of the reasons stated above, finding new recruits to replace them can be difficult. Employers in the United States and Europe have relied on immigrant labor, but as experts have pointed out, this does not address any of the structural concerns, and instead creates what Belzer refers to as “the migrant crisis.” “This never-ending race to the bottom.”
Parts of Western Europe, for example, used to rely on labor from poorer European countries to fill truck driving positions, but as those countries’ economies improved, those labor sources became scarcer. The shortage of truck drivers in the United Kingdom has been compounded by Brexit and the changes to immigration regulations that have accompanied it. Prime Minister Boris Johnson offered 5,000 short-term, temporary visas to select European truck drivers to help with holiday traffic congestion, but just a few accepted. Why come back for a few months merely to come back, a Polish motorist told a British publication “On the M25, pee in a bottle?”
Different issues face different places of the world. Stefan Pertz, who is located in Malaysia and heads Asian Trucker, a media company for the Southeast Asian commercial trucking industry, informed me that drivers in Malaysia earn around $800 to $900 per month, a figure that can stretch very far. But, yet again, at what price? Drivers are closely monitored and are only permitted to stop at designated rest locations. Poor infrastructure and roads can sometimes add to the difficulty. Other low-income countries face similar issues, which are exacerbated by another issue: there are people wanting to drive trucks, but corporations or businesses may not have enough cars. “It’s not a labor issue; it’s an asset, the truck,” Rodrigue explained.
These are long-standing issues, and the epidemic pushed the sector over the edge, even as the importance of truckers in the economy became obvious. However, the way the supply chain works may make it more difficult to address the global driver shortage.
Truck drivers and the human costs of our global supply chain
The hardships of being a truck driver the long hours, long journeys, and waiting for cargo at ports or warehouses aren’t by chance. It’s primarily a result of being caught up in the demands of the modern supply chain, which is currently under a lot of stress.
Despite the fact that trucker earnings are declining, shipping and logistics companies are boosting their rates, according to experts. However, none of this has made its way into the pockets of truck drivers. “The scraps are fought over by the trucking corporations. After the transportation corporations have fought over it, the drivers fight over the scraps left over. “It all flows down, and the most powerful party here always wins,” Belzer explained.
And, when it came to truckers, he added: “They are the least powerful people in the supply chain because of their position in the power relations.”
Wages for truckers have increased as a result of the labor demand in this stage of the epidemic, according to experts and those in the trucking sector, just as they have in other parts of the US labor market. There may also be attractive signing incentives available. Truckers, on the other hand, have no say over the routes they take or the time it takes for their product to be unloaded at a port. It’s still a demanding job, and it might not be enough.
“The Alaska Trucking Association’s executive director, Joe Michel, described it as “very basic.” “They’ll stay if you pay them more and treat them better.” The Biden administration in the United States established a trucker retention plan, which involves recruiting more veterans and researching working conditions in order to improve the sector. These, however, will not alter the business or provide a rapid answer for supply chain issues.
And these concerns are growing as the omicron strain of the coronavirus spreads, adding to the economy’s uncertainty. But it’s also a reminder that while we’re quarantining, we rely on truckers to provide surgical masks, Lysol, and food to prepare. They are the most important employees, and the question is whether they are treated as such.
During the lockdown, Pertz recalled, campaigns depicting truckers as heroes popped up all over the place. “All of that vanished the moment the lockdowns were lifted,” he explained. “And my problem is that these truck drivers continue to stock my supermarket; nothing has changed for them. Why aren’t they constantly portrayed as heroes, and only in the most desperate of circumstances?”
Is the trucking sector expected to expand in 2021?
While the future of freight transportation, supply chain, and logistics is far from certain these days, a new research published by the American Trucking Associations (ATA) recently gave a favorable picture for the trucking industry.
This report, titled “U.S. Freight Transportation Forecast 2021 to 2032,” is released at a time when supply chain concerns abound, including: ports still dealing with congestion and backlog issues, transportation capacity across all modes remains tight, owing in large part to labor and equipment availability issues, and the pandemic’s ongoing impact, as well as inflationary concerns.
Even while the aforementioned concerns exist, the research is upbeat about the future of trucking, which is a good thing given that trucking transports nearly 70% of the nation’s freight.
- Total freight volume is expected to increase by 28% from 15.1 billion tons in 2021 to 19.3 billion tons in 2032.
- While trucking’s share of freight tonnage will gradually fall from 72.2 percent in 2021 to 71 percent in 2032, overall volumes will increase across all segments of the industry, including truckload, less-than-truckload, and private carrier. The tonnage carried by trucks is expected to increase from 10.23 billion tons this year to 13.7 billion tons in 2023; and
- The overall revenue generated by primary freight shipments in the United States will rise from $1.083 trillion in 2021 to $1.627 trillion in 2032, according to estimates.
Given the importance of the supply chain in 2021, ATA Chief Economist Bob Costello pointed out that it’s crucial to bear in mind the numerous “stressors” it’s dealing with, such as basic growth in freight demand and the economy.
“Freight volumes are expected to rise 7.4% this year after declining 6.8% in 2020, and we will see ongoing growth in freight demand across all modes for the foreseeable future,” added Costello.
As the trucking industry continues to look to the future, ATA President and CEO Chris Spear stated that this research would serve as a “tremendous tool for industry executives and politicians” in order to gain a more realistic picture of what lies ahead.
“Forecast is an essential resource for everyone interested in understanding the overall freight sector, not just the trucking business,” Spears said.
Having previously written on this report, I came found this observation from a prior edition, which still holds true now, possibly more so than ever, given the strange and uncertain times we still find ourselves in.
“It’s worth noting that, while the supply chain can appear to be highly fragmented at times due to different modes of transportation, laws, evolving technologies and trends (think digital brokerage and last mile), many links of the network begin and stop with a truck.” That is something that cannot be missed, as evidenced by the facts presented in this paper.”
The lesson here is that, in good times and bad, trucking is an important component in our nation’s supply network. I don’t want to speak for others by categorizing things as “good” or “bad,” so I’ll use the terms “uncertain” or “strange” for the time being.
Taxes:
- Commercial vehicles paid $48.6 billion in federal and state highway-user taxes in 2019.
- Commercial trucks accounted for 14.4% of all registered cars in 2019, paying $19.3 billion in federal and $29.4 billion in state highway-user taxes.
- As of January 2021, each gallon of diesel fuel was subject to a federal fuel tax of $24.4.
- As of January 2021, each gallon of gasoline was subject to an 18.4 percent federal fuel tax.
- As of January 2021, the average state fuel tax paid per gallon of diesel fuel was $30.3.
- As of January 2021, the average state fuel tax paid per gallon of gasoline was $28.5.
Number of Trucks:
- In 2019, 37.9 million trucks (excluding government and agricultural) were registered and utilized for business reasons, accounting for 23.9 percent of all vehicles registered.
- In 2020, there will be 3.97 million Class 8 trucks in operation (including tractors and straight trucks), up 1.5 percent from 2019.
Number of Companies:
According to the United States Department of Transportation, there were 996,894 for-hire carriers on file with the Federal Motor Carrier Safety Administration in February 2021, 813,440 private carriers, and 83,235 other* interstate motor carriers.
* Motor carriers that did not indicate their section or checked numerous segments are referred to as “other.” All other options were ruled out.
International Trucking:
- In 2020, trucks will transport 70.9 percent of the value of surface trade between the United States and Canada.
- In 2020, trucks will transport 83.8 percent of the value of surface trade between the United States and Mexico.
- Truck-transported trade with Mexico plummeted 10.1 percent to $385.7 billion in 2020, while truck-transported commerce with Canada dropped 9.9 percent to $309.0 billion.
What is the rate of growth in the trucking industry?
The global local general freight trucking market is predicted to increase at a compound annual growth rate (CAGR) of 12% from $111.84 billion in 2020 to $125.24 billion in 2021. At an annual growth rate of 8.1 percent, the market is estimated to reach $170.8 billion in 2025.
Is trucking a viable career option in 2021?
The year 2021 is expected to be a pivotal year for the trucking sector. The economy and truck driver demand are predicted to recover from the pandemic’s negative effects in 2021, with an increasing trend continuing into 2022. Anyone interested in becoming a professional truck driver should begin their training as soon as possible as we approach 2021!
Economic Rebound
Despite the fact that the economy suffered a setback in 2020, the demand for truck drivers to transport freight remains high. Sales of e-commerce and online shopping have never been higher, and they are likely to continue to rise in the future years. As a result, America will continue to require drivers to transport increasing amounts of freight. Truck freight is expected to climb 6% in 2021, according to FTR Transportation Intelligence, which should be regarded substantial growth when looking at year-over-year comparisons.
To satisfy rising freight demands, the trucking sector will need to hire more drivers. The trucking sector is now experiencing a driver shortage. Unfortunately, if current trends continue, the trucking sector may face a driver shortage of more than 100,000 by 2023. Despite the high number, this is good news for novice drivers. After receiving their CDL, new drivers will have a range of work options.
Increase Pay Rates
Another reason to pursue a career in the trucking sector is the current boost in pay rates for new drivers being implemented by corporations. Because of the significant demand, spot rates are rising compared to previously in 2020. New prices are being offered to drivers that are far more enticing. A truck driver’s typical wage right now is between $55,000 and $60,000, with an entry-level driver earning between $40,000 and $50,000. The more experience a driver has, the more money they can earn. Different certifications and licenses, such as hazardous or excessive loads, might further enhance pay rates.
Fast Training
Fortunately, CDL training is quick, and those who wish to get their CDL can start driving in their new employment in as little as four weeks. Truck driving, unlike other professions, does not require years of training and education, so students may get out and start earning money right away.