The freight situation isn’t getting any better, according to industry experts. Most analysts reported a decline in April freight volumes from March. One contributor to the drop might be the calendar itself: March had three more business days than April, and March was also the final month in the quarter —a time when shippers like to move inventory to get it off the books.
However, the calendar can’t explain the year-over-year declines from April 2022.
According to a May 10, 2023, release from DAT Freight and Analytics, dry van freight declined 15.5% from March and 12.3% from April 2022. Temperature-controlled freight dropped further, by 16.3% from March and 12.5% from April 2022. Flatbed freight fell 13.7% but was actually 3.5% higher than last April (flatbed freight would be impacted more by government infrastructure initiatives than other freight types).
The DAT report claimed that dry van and temperature-controlled freight hit their lowest levels since February 2021, a month when a polar vortex brought frigid temperatures and severe winter weather, with a marked disruption to freight movement.
“May will be pivotal for shippers, brokers and carriers,” said Ken Adamo, DAT’s chief of analytics. “After a challenging first four months of the year, we expect to see the effects of seasonality on freight volumes and rates. The question is how sustainable those effects will be.”
In the same report, DAT indicated the load-to-truck ratios on its load board were down for all three trailer categories. When fewer loads are posted for each truck, there’s more competition for those loads and rates are pressed downward. As a result, all three categories experienced lower rates, with average dry van spot rates falling 10 cents below March and 71 cents per mile from April 2022 rates. Temperature-controlled freight showed similar reductions. Flatbed spot rates fell 4 cents and were 70 cents per mile lower than in April 2022.
Adamo pointed out that, for rates to rise, two things are needed — fewer trucks and more freight. The fewer trucks part of the equation is beginning to happen as carriers reduce truck orders and some close their doors. More freight could be available as construction season ramps up and produce harvesting begins, but inflation and higher interest rates could continue to dampen the market.
A May 16 release of ACT Research’s Freight Forecast, U.S. Rate and Volume OUTLOOK report addressed carrier closings.
“Interstate operating authorities are contracting at a record rate, with about 11,000 net revocations since last October, including about 1,600 net revocations in April,” said Tim Denoyer, ACT vice president and senior analyst. “This is beginning to tighten capacity, which will also help spot rates find the bottom and begin to rise.”
Denoyer noted that grants of new authority and reinstatements of carriers whose authority lapsed due to insurance cancellations and other factors were also higher than usual. The overall number of carriers, however, is declining.
Another factor that impacts truck numbers is the number of drivers employed.
“Long-distance trucking employment is also contracting, as long-haul trucking jobs declined by 8,700 jobs in Q1’23, or 1%,” Denoyer said. “While still up 3% year-over-year in that latest March data point, the series will be down on a year-over-year basis by June on its current level. Since trends in employment follow trends in freight rates, long-haul jobs are set to decline this year.”
In another ACT release dealing with Class 8 truck production, ACT President and Senior Analyst Kenny Vieth addressed the predicted economic recession.
“We continue to expect a shallow recession to materialize, centered on mid-year,” Vieth said.
David Spencer, Vice President of Market Intelligence for Arrive Logistics, speaking on the recent Bureau of Labor Statistics report showing an increase in trucking jobs from April 2022, said, “Continued job growth in the trucking sector has continued to defy expectations given the declining rate environment. The growth is likely driven by a combination of owner operator capacity having stuck it out longer than expected on their own and now finally making the shift to company jobs, as well as seeing growing truckload demand, such as non-single family housing construction and oil and gas drilling.”
The Cass Freight Index for Shipments, which measures freight levels in multiple modes of transportation, fell by 1% from March and by 2.4% from April 2022. The Cass index for freight expenditures fell much further, as record high freight rates continued their downward trajectory. The Index showed a 2.1% decline from March expenditures and a 14% drop from April 2022 numbers.
The Cass release, however, seems bullish on freight availability and rates in the coming months. Although the firm reserves forecast prediction numbers for its paid subscribers, the release included the comment, “… after a long soft patch, we see the U.S. freight transportation industry on the verge of a new cycle as we begin to transition from the bottoming phase into the early phase of the freight cycle in the months to come.”
The “cycle” mentioned is the Truckload Cycle, or Capacity Cycle, that the trucking industry invariably follows. The premise is simple: When carriers are making money, they buy trucks. That’s because they want to take advantage of high freight rates by hauling as much as they can. But as the number of available trucks increases, so does competition for available loads, meaning that shippers don’t have to pay as much. Rates fall, and they continue falling until enough trucks leave the market to balance again.
Trucks — and drivers — are leaving the market and rates are, hopefully, at their lowest point. A recession, if one occurs, won’t help. At some point, freight levels will rise, and rates will respond by rising, too … and carriers will buy more trucks. Depending on who is pontificating, that point is somewhere between now and six to eight months from today. Until then, truckers will do well to keep expenses to a minimum and be selective on the loads they haul.
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.