Inflation has fallen dramatically, fuel prices are down and people are still buying, yet the domestic trucking industry has been suffering from low demand for the past 17 months straight. Some even call it a freight recession.
The trucking industry was one of the big winners during the pandemic. A combination of low diesel prices, pandemic government subsidies for the industry, and high consumer demand, led to an unprecedented boom. As a result, freight rates started to rise.
But as the pandemic receded, so did the demand for goods. The trucking industry slumped in the second half of 2022, and in 2023 that trend of extremely low demand continued.
With too much supply and little demand, many are leaving the industry, from big trucking corporations, small trucking companies, and even solo truck owner-operators. The trucking industry is an extreme outlier in an otherwise well-performing economy.
Trucking is a demand-driven industry. It responds to the market as demand and supply change and that is something that changes quickly. That makes it very volatile, according to Gregory DeYong, Associate Professor of Operations Management at Southern Illinois University in Carbondale, Illinois.
“The trucking industry is on the ragged edge of economic trends in general, both positive and negative, and goes through a lot of gyration,” DeYong said.
Nabil Ahmad, 31, has been driving a truck for a year and a half, making him a trucking recession driver. A solo driver, he works 5 days a week, 9 hours per day, and averages about $1600 per week. That is better than his old office job, which paid him minimum wage, but it is nothing compared to how much truck drivers used to earn before COVID-19, especially since he has to pay college student loans. He said it is important to work for a company that consistently finds loads to deliver and he hopes to eventually make more money.
High inflation in the last few years led people to buy fewer durable goods, like cars, appliances, furniture, and consumer electronics, DeYong said. Those products are a big part of the trucking business, and with people saving their money to buy essentials, there was less for trucks to carry.
High diesel prices, meanwhile, cut into the trucking industry’s profit. Businesses are making less money as demand is falling while diesel is high. According to the U.S. Energy Information Administration, the average price of a gallon of diesel off-highway in February was $4.109. This is by no means a record high, but it is a relatively high price for a product that trucking companies rely on heavily.
This combination of low demand and high diesel prices is pushing some trucking companies out of the business altogether.
In July 2023, Yellow Corporation, which was one of the largest trucking businesses in the United States, filed for bankruptcy after 99 years in business. This happened despite the federal government buyout of 30% of Yellow in 2020 in exchange for Covid relief assistance. As a result, 30,000 workers were laid off and the company defaulted on $700 million in public funds. Nothing was able to save Yellow; not its large network of customers, not its huge assets, not its expansive facilities, and not even government intervention with large loans.
Part of why Yellow went under was its inefficiencies, but other companies, while not filing for bankruptcy, are still facing problems. In January 2024 UPS declared that it was also laying off 12,000 workers. Its shares dropped by 9% and its revenue in the 4th quarter was worse than expected.
Abdullahi Elmi, 43, owner of Green Trucking LLC in Columbus, Ohio, said business has been terrible for about two years.
Before the pandemic, Elmi operated 23 trucks. But now that is down to 12, and four of them have been parked, accruing expenses, for the last 3 months because his company can’t find enough loads for them. Before these 3 months, it was on and off and very unpredictable.
Mr. Elmi said that he survived this far because, unlike Yellow Corp, small companies have fewer expenses and are nimble. He also said that it helps that he only buys trucks cash, with no interest, because it is not allowed in his Muslim religion to do so. He said business is still tough because there is so much competition for the little freight that is transported. A typical job that would have cost $2,000 before, now hovers around $1,000 to $1,200.
