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Federal data shows that the trucking industry has been mired for months in a sustained overcapacity relative freight demand, even though it has been slowly shedding workers.
The Bureau of Transportation Statistics reported that employment in the transportation sector fell 0.2% over the past year to 6.58 millions in May 2024. However, truck transportation employment dropped 1.9% to 1.55million. This was the eighth consecutive month that truck employment declined from the previous year.
American Trucking Associations reported a softening in the industry during the month.
ATA’s senior economist Lindsay Bur noted that of the 272,000 jobs added in May, 10,600 were in transportation and warehousing. For-hire trucking employment dropped by 5,400 after a drop of 900 jobs in April.
May 2024 U.S. Transportation sector Unemployment (5.5%) is higher than the May 2023 level (3.6%) or Pre-Pandemic Level of May 2019 (4.3%).
Seasonally adjusted, #Employment in the transportation and warehousing sector rose to 6,583,500 #Jobs in May 2024.https://t.co/rGFYgHVVbB pic.twitter.com/8YVCnqwq4u — Bureau of Transportation Statistics (BTS) (@bts_usdot) June 7, 2024
“Compared with a previous year, trucking employment has decreased by 1.9%,” ATA said. “The DOL reported [that] unemployment rates have risen to 4% for first time since January 20,22.”
Across industries, ATA reported that the leisure and hospitality sector had an increase in employment of 42,000 jobs and restaurants saw a gain of 25,000 jobs. Department stores and furniture retailers saw job losses, indicating that businesses expect a service-driven Summer.
“I believe we are still in overcapacity,” said Daniel Imbro a research analyst with the financial services company Stephens. “I’d say it’s a gradually normalizing process. We haven’t seen any significant changes in employment data or the state of supply versus demand.
Imbro said that while the employment rate is improving, it is not enough to bring back the freight market into balance. He said that the industry has yet to overcome an overcapacity issue following a significant growth spurt that began shortly after the coronavirus outbreak. Since about two years, freight demand has been slowly decreasing.
Imbro said, “I think the market is slowly correcting itself.” “I think that as we move into spring, this time of the year should be busier. We’re seeing some seasonality in terms of demand throughout the year. I think that will continue. I think that we’ll have a peak in the second half of this year. It won’t look like the previous peaks, but I think we’ll see a more normal demand this year. This is why we are forecasting rates to start improving later this year.”
Imbro stated that the capacity issue is due to spot rates being lower than the estimated operating costs for a few months. He suspects that some of the decline in the industry is due to owner-operators using up their savings and some bankruptcy.
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Nathan Lease, senior director of research for logistics and customer satisfaction at Gartner, said: “I think that the challenge with the transportation market is that it’s commoditized.” “Right now we’re in a freight recession, where there’s more capacity moving goods than there is.” If you look at the labor statistics, you’ll see that we are still at high labor levels.
Lease said that the transportation market needs to maintain a balance between capacity and freight demand. He said that a commoditized sector is naturally prone up-and-down cycle, as there’s a constant balance between drivers available and freight demand.
Lease explained that the market is more transactional, and driven by supply and demand. Right now, there is more demand for tangible goods than there are trucks and drivers. With the inflationary pressures, consumers are shifting their buying patterns from tangible goods to service. Some sectors are also experiencing a decline in demand for shipping products. This is the balancing act going on and why transportation jobs are decreasing.”
Derek Leathers, CEO of Werner Enterprises, discussed the issue at the Wells Fargo Industrials 2024 Conference. Werner is ranked No. Transport Topics Top 100 List of the Largest For-Hire Carriers in North America ranked Werner No. TT’s Top 100 list of logistics companies places us at number 30.
Leathers said, “It’s been two years of a very challenging market, especially on the non-dedicated or one-way side of the business.” “We saw a slow bleed-off from excess capacity, but we did see an increase during COVID. As we sit down today, I believe that the bleed-off continues and we continue to witness carrier exits, which have led to a scenario where we’re nearer the end than the start, but not really at an inflection.