Amidst the turmoil and uncertainty that came with the Covid-19 pandemic, the trucking industry has weathered quite a storm. Business conditions and supply chain issues have truly challenged the way carriers operate. It seems highly likely that there will be an economic recession in 2023, but this does not mean that complete chaos and economic ruin awaits us all. A major recession is not inevitable. But what does this mean for freight and the trucking industry?
The Impact on Freight
Interestingly enough, wholesaling is up from 2019. And real manufacturing output is up and near a peak not seen since 2018. These are indeed very good signs. The demand for freight hasn’t been this high in five years. This means that businesses that rely on the trucking industry to thrive are also seeing increases in growth and demand as well, like businesses who deal in international truck parts and driver safety gear. Although there have been some losses for the largest publicly traded carriers, net income is still up and on the rise. Consumers are still spending money, as evidenced in the 2022 holiday season. And as long as there is spending, then there is a demand for freight to be moved across the country.
Profitability
The labor market isn’t showing a sharp decline in job openings, a holding pattern in payroll growth and the number of people quitting isn’t extremely low. With payrolls being up, labor is still in short supply. Sustained job growth can help relieve wage inflation. According to the Driver Availability Index, the number of truckers available to meet the freight demand is balancing out. While the industry seems balanced for the moment, this could change in the coming years as drivers retire and the number of industry newcomers shifts. Individuals who are looking to start a trucking business of their own can still do so safely and profitably. Freight and the trucking industry are an intricate and major part of the fabric of modern society. The U.S. economy doesn’t exactly work without freight drivers.
The Housing Market
New housing can have a big impact on the trucking industry in 2023 as it relates to freight volume. Single family housing builds are of particular concern for some industry insiders as contract and spot rates fluctuate. And even with the government ready to pour big dollars into shoring up infrastructure, the freight loads won’t be the same as that for housing and will be going to very different geographic regions.
It is clear that things are changing, but such is the way of the world. Although freight volume may be different and the median age of truck drivers is increasing, there is still a ton of opportunity and optimism for the trucking industry as we get 2023 well underway. The future is never certain, but it is definitely not looking bleak, recession or not. In fact there are some economists that are pondering whether an inbound recession will be as harsh as recessions of the past. If America’s balance sheet remains fairly strong, there could be a mild recession that won’t impact the trucking industry too heavily.
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