Presented below is current data for the U.S. economy, illustrating ongoing economic challenges. The expanded overview of macroeconomic conditions is presented in a Costmine 2024 update of the Motor Carrier Industry (Costmine 2024 update) in the U.S. in July 2024 and is not repeated.
- Updated advisory was issued in September for maritime shippers transiting the Suez Canal, Red Sea, Arabian Sea, and Gulf of Aden by the Joint Industry Security Group, in response to escalating attacks tied to the Israel-Hamas conflict, emphasizing enhanced naval protection for vessels linked to Israel, the U.S., and the UK (Maritimeglobalsecurity.org, 9/24/2024)[1].
- Widespread labor disputes are affecting multiple sectors. A strike of 45,000 ILA longshore workers began on October 1 at East Coast and Gulf Coast ports, causing significant global supply chain disruptions. Shipping delays were already in effect by late September 2024, and United Auto Workers are threatening strikes at Ford and Stellantis (formerly Dodge). A strike of grain workers at Port of Vancouver BC began on September 24, 2024 (gcaptain.com)[2]. Strikes at Boeing started in September, and the Teamsters Canada rail shutdown has continued since August.
- In addition to the three recession indicators cited in the July Motor Carrier update, a fourth measure—the U.S. unemployment rate—is now being tracked by both the Bureau of Labor Statistics (BLS) and ADP, in collaboration with the Stanford Digital Economy Lab. Taken together, these indicators signal a recession is underway. ADP data is considered more accurate, as it is a primary provider of employment and payroll services across the U.S., while BLS uses sample estimates. ADP’s report pegged August’s job growth at 99,000 jobs (Economist Dr. John Rutledge, ADP Employment Report)[3], marking an 89% drop from the 2021 peak. Historical data since 1968 shows recessions begin 8-17 months, averaging 10 months, after the bottoming of unemployment claims. August 2024 marked 19 months (EPB Research, Sept 22, 2024) since the low in unemployment claims, with job creation declining 2-3 times deeper than in the last eight recessions (BLS Civilian Unemployment). The inescapable conclusion is that a recession has already begun, though it has not been formally announced.
- The Sector that Trucking Serves Remains Both Uncertain and Hopeful
The Institute of Supply Management’s (ISM) PMI indices offer a mixed outlook for trucking, with the ISM’s PMI Services Index showing expansion and the ISM’s Manufacturing PMI Index signaling ongoing challenges.
Services. The broad Services PMI Index rose by 0.5% to 51.5% in August 2024, indicating expansion but still 5% below last year’s levels. A leading indicator of truckload demand, the New Orders component of the ISM Services Index increased by 0.6% to 53.0%, while the Inventories component rose by 3.1% to 52.9%. However, backlogs have fallen. Growth in the Services PMI Index, observed in new orders, supplier deliveries, inventories, and prices, has only been two months long, while backlogs continue to fall. The ISM Services PMI has trended downward from a high of 65% in July 2021. Key industries experiencing growth in August include recreation, mining, transportation, warehousing, finance and insurance, educational services, and utilities (ISMworld.org; Trading Economics).
Manufacturing. The ISM Manufacturing PMI Index increased by 0.4% to 47.2% in August 2024 from July, reflecting a prolonged period of low readings and a continuing downward trend from 63% in July 2021. The index has been below 50, signaling contraction in manufacturing, which represents 10.3% of the U.S. economy. Several sub-components are declining, including new orders, production, and supplier deliveries. Only inventories, prices, employment, customer inventories, and imports show growth, raising concerns (ISMworld.org; Rail Time Indicators, 2024; DAT.com, Sept 2024). Manufacturing output and capacity utilization have declined since early 2022. Industries showing growth in August included primary metals, petroleum, coal, furniture, food and beverage, and computer electronics.
Cass-BTS. The Cass Freight Index and the Transportation Services Index (TSI) of the Bureau of Transportation Statistics (BTS), as well as the TSI Freight Index, have shown declines since early 2021. Cass Information Systems provides freight and audit payment management services valued at $44 billion annually. The TSI Index tracks freight volumes across rail, trucking, inland waterways, pipelines, and freight combined.
Cass. The Cass Truckload Linehaul Index, covering both spot and contract rates, dropped 13% from 168 in mid-2022 to 137.5 in July 2024. A quick recovery seems unlikely, as forecasts remain negative. Both the Cass Freight Shipment Index and the Linehaul and Inferred Rates Indexes have declined since mid-2021, falling by 8% from a February 2021 peak (Figure 5).
[1] The transportation share was 14,000 employees of an employment total of 99,000 persons.
[2] Data from Federal Reserve, BEA, BLS, Census Bureau and Dept. of Labor
[3] https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/
Figure 5. Cass freight indexes
The Logistics Manager’s Index (LMI)[1] dropped to 55.3 in June, from 55.6 in May to indicate a moderate rate of expansion (the-lmi.com). The LMI score combines eight components of the logistics industry to include inventory, costs, warehousing, utilization, prices, and transport capacity. The index has expanded for seven consecutive months of the last 11 months. Inventory costs fell by 1.6% as Inventory Levels contracted 0.8% for the second month. Warehousing Utilization (-11.4%) and Transportation Capacity (-3%) were each down which is the first month showing contraction since March 2022. A continued change in the combination of pricing and transportation capacity moved above “break-even” in January 2024 and may spell the end of the freight recession (the-lmi.com June 2024; DAT.com, July 23, 2024).
The Home Depot reported a 3.3% sales decline in Q2/24 and anticipates a further 3%-4% drop through the rest of 2024 due to high interest rates and economic pressures affecting home improvement (Flatbed report).
- Employment and Wages
Employment combined in truck, rail, and warehousing has fallen 5.4%, from 3.67 million in mid-2022 to
3.49 million in August 2024 (BTS; Rail Time Indicators, 2024). However, since 2019, truck transportation and
warehousing employment have increased by 600,000 and 700,000, respectively, while rail employment has
declined by about 300,000. This decline reflects the rail industry’s adoption of an efficiency-focused
approach, often referred to as “doing more with less,” influenced by Canada’s rail practices and embraced
by U.S. railroads like Burlington Northern-Santa Fe (BNSF). In contrast, trucking has avoided this trend, with
employment growth continuing despite industry challenges (Figure 6, Bureau of Transportation Services,
https://www.bts.gov/freight-indicators#non-fam). As of July 2024, general freight truck employees earn an
average of $31.57 per hour, a 22.3% increase from $25.80 per hour in January 2020. However, employment
growth in the trucking sector has been modest, rising by 24,800 employees to a total of 544,200—a 4.8%
increase since January 2020 (Figure 6).
[1] https://www.the-lmi.com/june-2024-logistics-managers-index.html
Figure 6. Employment and hourly earnings for general freight trucking, long distance.
- Myriad of Factors Affect Trucking
The post-COVID freight recession that began in early 2022 was one of the deepest on record (ft.com, August 2024), though the industry is stabilizing. Shipments rose by 9% year-over-year, while tender rejections dropped in Q2/2024. Marginal costs, excluding fuel, increased by 6%, with insurance and maintenance costs rising by 30%. The surplus of trucks from the pandemic boom remains, resulting in underutilization. The industry is hopeful that consumer demand will gradually rise as Federal Reserve interest rates decline, though this transition has been slower than anticipated.
- Small carriers have fared better, comprising 85% of the market. Access to commercial licensing and digital platforms has supported the “Uberization” of freight, enabling smaller carriers to survive. Owner-operators, who retain 70%-80% of gross income, have not exited the market, in contrast to company operators who earn only 20%-25%.
- A freight shortage impacts drivers, consumers, and businesses. Changing consumer spending habits have shifted the types of goods shipped.
- Driver shortages reached 80,000 in 2021.
- Driver concerns—including stress, job difficulty, health challenges, and job retention—make attracting and retaining drivers challenging. Employers must focus on pay, work conditions, and incentives.
- Supply chain demands and pandemic disruptions continue, affecting freight capacity, job stability, and consumer prices.
- Pandemic-related port backups persist, worsened by driver shortages and the threat of port worker strikes.
