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How the Freight Industry Is Rebounding in the Wake of the Recession

The American economy took a serious hit in March, April, and May of this year, with unemployment spiking at nearly 15%. This percentage of people left without full employment in America was so large, you’d have to go back 80 years to find a comparable moment of economic strife. Much of the spike is attributed to the coronavirus pandemic, a serious public health crisis that required many industries to slow down or cease operations completely in order to prevent a widespread infection.

Luckily, there’s been good news on the job front. As of early July, unemployment decreased to 11%, indicating roughly 4.8 million people returned to work since the coronavirus pandemic began. This brings the rate of unemployment back in line with some more relatable markers in American history, not too long ago. The recessions of 1983 and 2009 both yielded unemployment rates of roughly 10%, which gives Americans who have lived through past economic downturns a small indication of how things might progress in America moving forward.

Employment in the Freight Industry

Trucking in America has gotten a lot of positive attention from the federal government from the very beginning of the pandemic. Truckers were declared essential workers by the White House with little delay. This kept owner/operators’ jobs secure, to some degree, but also created new challenges for workers in an industry becoming more isolated by the day—with truck stops and highway restaurants shutting down left and right due to the pandemic and necessary practice of social distancing.

The following months were a mixed bag for O/Os, with notable difficulties for freight owners and logistics companies. The American supply chain became severely lopsided overnight, with demand for medical supplies and food products spiking in urban areas, causing full truckloads to enter metropolitan areas at an increased rate, only to find there wasn’t anything to fill their trucks with on the way back out to a factory or distribution center (and we all know how fast you bleed money driving an empty semi-truck). This caused per-mile rates to be wildly inconsistent across different areas of the country, with some O/Os making money hand over fist, and others finding out they’d make more money if they chose not to drive at all.

Good News for Truckers As of July

We’re starting to see a steady rebound in trucking rates all across the country. According to data gathered by DAT Freight & Analytics, Los Angeles and Chicago have continued to improve, with substantial rate increases on nearby high-volume freight lanes.

Note: The rates listed below are averages from the beginning of June, based on actual transactions between carriers, brokers, and shippers.

  • Chicago to Columbus, OH, rose 19 cents to $2.34 per mile
  • Chicago to Detroit gained 15 cents to $2.78
  • Chicago to Allentown, PA, was up 13 cents to $2.32
  • Los Angeles to Denver jumped up another 25 cents to $3.09
  • A. to Seattle climbed up to $2.74

In addition to this good news, there was another increase on the lane from Charlotte, North Carolina, to Buffalo, New York, where the average rate increased by 20 cents to $2.31 per mile.

Prices from Atlanta down into Florida are on the way up as well. Produce season is starting to end in the southern states, so demand has begun to shift away from outbound and back toward inbound traffic. The rate from Atlanta to Lakeland, Florida, was up to $2.41 per mile at the start of June as a result.

Overall, 72 out of the top 100 van lane rates have increased, while 16 others maintained their previous levels. This makes it a great time to be on the road, and gives O/Os good reason to watch rate changes with a sharp eye in order to maximize their route efficiency.

Trucking’s Long Term Trajectory

It’s no secret the freight industry has been seeing troubling signs for a couple years running. Class 8 sales have dipped, and even before COVID-19 there were prominent news outlets writing about the freight industry being in recession.

Press surrounding trucking can be a tricky subject. It’s true transport stocks haven’t been doing well for a long time. The SPDR S&P Transportation ETF is down more than 24% year to date as of June 9, an abysmal return when compared to the S&P 500 and Dow Jones Industrial Average. This ETF is well-diversified, and a commonly used indicator for the health of the freight sector. The holding includes planes, trains, and auto companies. Uber Technologies (UBER) and Lyft (LYFT) are in the ETF now, along with the usual suspects, such as United Parcel Service (UPS), the Union Pacific railroad (UNP), trucking firm J.B. Hunt Transportation Service (JBHT), and JetBlue Airways (JBLU), among others.

While XTN is a good indicator of the transportation industry on the whole, it also includes a healthy percentage of some of the worst performers in 2020 like airlines and rideshare companies, both of which suffered monumental losses as a result of COVID-19.

The trucking industry on the whole hasn’t suffered the same level of constriction that airlines have, and the health of the industry isn’t well measured by the health of public companies. As a matter of fact, more than 95% of carriers have less than five trucks. The country is full of small, independent truck operators, and as long as rates increase, it’s expected they’ll come out just fine.

The bottom line is trucking companies are the lifeblood of America, and there’s no indication the demand for truckers is going to decrease any time soon. If you’re interested in getting started as an owner/operator, contact us at Mission Financial.

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