Trucking Workforce Declines but Overcapacity Remains

The industry is slowly shedding workers. (vitpho/Getty Images)

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The trucking industry has for months remained mired in sustained overcapacity relative to freight demand even as it has slowly shed workers, federal data shows.

The Bureau of Transportation Statistics found employment in the transportation and warehousing sector declined 0.2% year-over-year to 6.58 million in May 2024, but noted that truck transportation employment fell 1.9% over the same time to 1.55 million. This marked the eighth consecutive month truck employment decreased from the previous year.

American Trucking Associations noted a softening specific to the industry for the month.

“Of the 272,000 positions added in May, 10,600 of them were in transportation and warehousing,” ATA said, with for-hire trucking employment shedding 5,400 jobs following a drop of 900 in April, noted ATA senior economist Lindsay Bur.

May 2024 U.S. #Transportation sector #Unemployment (5.5%) rises above the May 2023 Level (3.6%) and Pre-Pandemic May 2019 Level (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 year earlier, trucking employment is down 1.9%,” ATA added. “The DOL also reported [that] the unemployment rate ticked up to 4% for the first time since January 2022.”

Across other industries, ATA noted employment increases above prior average 12-month gains for the leisure and hospitality sector at 42,000 and restaurants at 25,000. But department stores and furniture retailers experienced job losses, an indication that businesses are expecting a service-driven summer.

“I think we are still in a state of overcapacity,” said Daniel Imbro, a research analyst at the financial services firm Stephens. “I would say it’s a slowly normalizing process. We’re not seeing any step function change yet, either in the employment data or in the state of capacity versus demand.”

Imbro noted that while employment is slowly going in the right direction, the pace isn’t enough to bring the freight market back into balance. The overarching challenge, he said, is that the industry is still digging out of an overcapacity problem following significant growth that started shortly after the coronavirus pandemic hit. Freight demand has been steadily slowing for about two years.

“I think it’s the market slowly correcting,” Imbro said. “I think as we enter the spring, this should be a busier time of year. So, we’re seeing a bit of seasonality in the shape of demand through the year. I think we’ll continue to see that. I think we’ll see a peak season in the back half of this year. It won’t be the same kind of elevated peak that we’ve seen in the past, but we will see, I think, a normal shape of demand this year. And so, that’s part of why we’re forecasting that rates do start to improve later this year.”

Imbro noted that the capacity side is a function of spot rates being below the estimated cost of operating for a handful of months. Because of that he suspects some of the decline is owner-operators dwindling down on their savings as well as some bankruptcies in the industry.

“I think the challenging thing with the transportation market as a whole is it’s very commoditized,” said Nathan Lease, a research senior director for logistics and customer fulfillment at Gartner. “Right now, we’re sort of in this freight recession [where] there’s more capacity than there are goods moving around. But if you look at that labor statistic, you can see that we’re still at elevated labor levels.”

Lease noted that the transportation market must maintain a supply-and-demand balance in the sense of capacity versus freight demand. He said that such a commoditized industry is naturally prone to up-and-down cycles, as there is a constant balancing act between available drivers and demand for freight.

“It tends to be more transactional and more commodity driven based off of supply and demand,” Lease said. “Right now, there’s more supply of trucks and drivers than there is demand for shipping tangible goods. Some of that’s consumers’ buying pattern changes, shifting from tangible goods to services with the inflationary pressures that are going on, [and] some sectors coming down in terms of overall demand to be shipping products. So that’s the balancing act that’s going on right now and why transportation labor is inching downwards.”

Werner Enterprises CEO Derek Leathers discussed the issue during the Wells Fargo 2024 Industrials Conference. Werner ranks No. 17 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 30 on the TT Top 100 logistics companies list.

“Obviously, it’s been a couple years of a very difficult market — in particular, on the one-way or the non-dedicated side of the business,” Leathers said. “That’s where we saw an uptick during COVID and the subsequent increase in capacity that came along with it, and a slower than expected bleed-off of that excess capacity. As we sit here today, I think that bleed-off has continued and we continue to see carrier exits that have led to a situation where we’re closer to the end than the beginning, but not yet really at an inflection point.”