State of the State Mid-Year 2024: ‘Freight recession’ continues for trucking industry

The transportation sector and trucking in particular have been mired in an economic downturn for more than a year, and several stakeholders within the sector told Talk Business & Politics that there probably won’t be an uptick until the early part of 2025.

Arkansas Trucking Association President Shannon Newton said the trucking industry is suffering from a “freight recession” spurred by inflation, high interest rates and higher fuel prices

“Economic conditions continue to languish in a lackluster stage. … There are mixed signals on an economic uptick. Even this week, new numbers were released showing a miniscule improvement over last month, but still underperforming from where we were a year ago, which wasn’t great then,” she said.

This is an election year, she said and nothing is going to change dramatically until it’s decided.

“For the most part, industry leaders and owners are optimistic, but I’m not sure if that’s data driven or just because it doesn’t seem like we can stay where we are any longer. Typically, election years are filled with economic uncertainty, so I don’t expect to clearly be out of this downturn by the end of the year,” she said. “A clear path to economic prosperity for Americans in general will be the key factor in a recovery for the freight industry.  Consumers need a reduction in interest rates and inflation.  Expendable income will drive demand for durable goods and demand for construction.”

Recent economic struggles are not the only reason for the freight recession, she said. Ever since the onset of the COVID-19 pandemic four years ago consumer habits, supply chains and other factors were radically changed and have not returned to pre-pandemic levels, she said.

“The COVID pandemic significantly impacted consumer behavior. Economic and public policies created excess cash and time for people to spend, largely on products and projects. The demand for the movement of goods exceeded anything we had ever seen before.  But those behaviors and the acquisition of those items, didn’t allow for the demand to extend after travel, leisure and experiences returned. Couple that shifts with more Americans either working from home or not working at all, the inflationary costs of everyday items, we just haven’t been able to re-establish pre-pandemic normalcy,” she said.

RJW Logistics Group CEO Kevin Williamson agrees with Newton’s assessment. Consumerism drives the trucking sector and consumers have had less expendable income since the third quarter in 2022 to now. His company works with more than 1,000 vendors and suppliers and the projection is that a recovery won’t happen until possibly the second quarter of 2025.

“Truckloads continue to be soft. We continue to see this downturn,” he said. “Until you see demand rise and supply chains stabilize you are not going to see a recovery.”

A leading indicator of a recovery will be through the food and beverage sectors. As consumers regain buying power, those are the first two sectors to be impacted, Williamson said.

The freight recession has been a major issue for the sector for more than a year, but there are other challenges, Newton said. One is finding enough drivers.

“Attracting, training and retaining qualified truck drivers to the profession remains a challenge.  During this economy, because the lost opportunity costs for carriers is not as significant, the issue tends to dwindle in priority.  But in order to offset demographic trends, we remain significantly behind in generating adequately trained individuals coming into the industry,” she said.

Fraud schemes involving cargo theft are on the rise and it has become a serious issue, she said.

“One emerging issue impacting the trucking industry in Arkansas and the country is the acceleration in both prevalence and sophistication behind freight fraud schemes.  Retail cargo theft is reported to have escalated 57% in 2023, costing the industry in excess of $130 million. These levels obviously impact both costs operating and insurance costs,” she said.

Judgments in lawsuits against trucking companies and truckers have been on the rise in recent years even as the number of truck involved accidents has been on the decline, she said.

“A recent study released by the Institute for Legal Reform found that the average verdict in trucking cases increased by 867% between 2010 and 2018, even though trucking accidents per mile decreased during that same time period. In other words, trucking is getting safer, but verdicts are getting bigger,” she said.

Even with all the challenges, the trucking sector continues to connect consumers to a wide variety of daily necessities.

“The trucking industry is the backbone of America’s supply chain and economy. We depend on it to deliver important items – like groceries, diapers, and even the clothes we buy – to stores safely and on time. But trucking companies face a rising tide of lawsuits, which is causing real harm to this vital industry,” Newton said.

Editor’s note: The State of the State series provides reports twice a year on Arkansas’ key economic sectors. The series publishes stories to begin a year and around mid-year to provide an update on the state’s economy. Link here for the State of the State page and previous stories.