ATA Chief Economist announces trucking catastrophe, despite positive indicators
Truckers typically bristle at the American Trucking Associations (ATA), an industry group that represents trucking companies rather than America’s 1.8 million truck drivers themselves. They’ve differed on just about every topic in the trucking world – whether teenagers should become truck drivers, if there’s really a trucker shortage, and how truckers should be compensated for rest breaks, if at all.
But it seems the ATA and truck drivers have reached some sort of agreement on the state of their industry in 2019: It’s suffering.
“There is no way these folks are making money now,” the ATA’s chief economist, Bob Costello, said at an industry conference on Monday, as reported by the Commercial Carrier Journal. “We do not have to go into a recession for this to be a bloodbath.”
Costello said that because of the decline in rates in the spot market, the next 18 months specifically would be challenging for truckers. The ATA did not respond to Business Insider’s request for further comment.
This year alone, nearly 3,000 truck drivers have lost their jobs as trucking companies large and small have shuttered. Major carriers like J.B. Hunt, Knight-Swift, and Schneider have been forced to cut their annual outlooks. The rate sentiment among industry leaders dipped to recession-level lows in July, a Morgan Stanley survey found.
Positive indicators
Some positive indicators have come out recently too. ACT Research noted a surprising volume uptick in July, something the transport-data group called “an anomalous spike.” The ATA’s Truck Tonnage Index jumped by 7.3% year-over-year in July.
“Volumes showed signs of life in July for the first time this year, for at least some of our friends in the industry,” Tim Denoyer, an ACT Research vice president and senior analyst, said in a release.
Trucking is highly cyclical, with huge peaks and lows that often catch trucking companies and their customers by surprise. Ups and downs make retailers, manufacturers, and trucking companies unable to adequately forecast demand for the years ahead.
While Costello’s comments make clear that a wider recession isn’t needed for truckers to suffer, a downturn in freight often foretells suffering in the rest of the economy.
Trucking as a global indicator
Trucking is often looked at as a leading indicator of where the rest of the economy is headed. As 71% of America’s freight is moved on trucks, companies foreseeing needing fewer trucks is typically an omen of an economic downturn: If manufacturers are producing less and people are buying less, there’s less of a need to move goods.
When the rest of America is headed for a downturn, freight usually dips first, a report from Convoy’s economic research division said. The industry went into a recession in April 2006, more than a year before the rest of the economy was clobbered by the Great Recession, starting in January 2008.
However, a tumble in shipping doesn’t always foretell a recession for everyone else. The freight industry goes into recession twice as often as the rest of the economy, Convoy found.
“When manufacturers get scared, they cut production, meaning fewer jobs or even layoffs, as well as fewer truckloads going out the door, reducing the options for trucking companies in assigning their trucks efficiently and profitably,” Jody Sims, a truck driver in Lexington, Kentucky, told Business Insider.
“The number of trucks available didn’t go down, but the number of loads did,” she added. “For most small companies, that left little to no profit margin, even for owner-operators who already own their own trucks.”
