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The trucking and freight economy appears to be doing better than the overall U.S. economy as fleets adjust to contend with supply chain changes caused by the COVID-19 pandemic.
American Trucking Associations Chief Economist Bob Costello said the jobs report, released by the Department of Labor on Aug. 7 was reasonably encouraging for the industry.
“In terms of trucking, there were 2,000 jobs added, that’s good. I have been hearing a lot of anecdotal reports that freight was really good in July,” Costello told Transport Topics, adding that the spot market also is doing well.
The latest survey from DAT Solutions confirms the belief that the industry is more than holding its own during this pandemic-induced recession.
DAT Solutions, which operates the industry’s largest load board network, said national average rates for vans, refrigerated and flatbed trucks entered August near their high marks for 2020.
Supply chain disruptions caused by COVID-19, DAT said, pushed more freight to the spot market during the time of year when demand for truckload capacity usually declines.
In July, DAT said van rates were $2.04 a mile, up 24 cents compared with June. Flatbed rates reached $2.20 per mile, up 13 cents, and reefer rates were $2.30 per mile, a 15-cent increase.
The average spot van rate last month was 10.6% higher compared with July 2019. Entering August, van and reefer rates were much higher than the year-ago July averages at $2.20 and $2.42 per mile, respectively.
DAT said fleets are showing their ability to shift the type of loads they carry based on consumer demand.
Load volumes out of the top 10 fulfillment warehouse markets rose 25% in July as a surge of imports for home improvement and other stay-at-home goods moved through supply chains, especially at Midwest distribution hubs, including Joliet, Ill., and Indianapolis. DAT added that along dedicated routes such as Memphis-to-Atlanta, spot van rates increased 10 cents to an average of $3.11 per mile last week. That’s up 55 cents over the past two weeks.
DAT also noted that because of it being hurricane season, a change occurred in spot market dynamics last week. In the aftermath of Hurricane Isaias the week of Aug. 4, more loads moved out of Florida than usual, with van volume out of Lakeland up 20% compared with the week before.
Meanwhile, the August report on the state of trucking from FTR Transportation Intelligence shows conditions are improving. FTR said that two months after plunging to its worst reading ever, minus 28.66, its Trucking Conditions Index spiked to a positive 11.35 in June, FTR’s highest level in more than a decade.
“The freight markets sustained a traumatic decline of volumes at the start of the pandemic,” FTR Chief Intelligence Officer Jonathan Starks said. “Consumer demand, on an absolute basis, will remain weaker as we deal with high levels of unemployment and a Congress that has been unable to foster a bipartisan solution to stimulate demand.”
ATA’s Costello said trucking’s economy is moving in the right direction. Still, long-term improvement for the overall economy and a return to pre-COVID-19 levels of activity could take up to two years, and only after the medical and scientific community begin distributing an effective treatment for COVID-19.
“I think it will be more than a year, it will be closer to two years,” he said. “There are a lot of fears that this is not a V-shaped, but a W-shaped recovery. Things are moving in the right direction, that’s good, and certainly our industry has not been hit as hard. But we need to set expectations that this isn’t going to be a rapid-fire recovery, it is going to be more a slog. I would anticipate things to slow down a little bit.”
The nation’s employment picture remains mixed. The Labor Department said the unemployment rate fell to 10.2% in July. It was the third consecutive month that hiring increased.
But extended unemployment benefits that have been keeping tens of thousands of Americans afloat financially expired at the end of July. The White House and Congress continue negotiations, but no deal is in sight. President Donald Trump signed a series of executive orders, but many Democrats said the action is unconstitutional.
Economist Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, told Transport Topics the $600-a-week benefits kept the economy afloat from March through July.
“If the economy does not come back as fast, the companies will start cutting people. That’s how it goes. You will see a second round of layoffs if we don’t open that much,” he said. “The way it looks now, it looks a little bit iffy that in the fall we’ll see some reopening. It depends on the total growth of the economy.”