The freight industry is finding itself navigating through turbulent waters that experts characterize as among the most challenging periods in the sector’s history.
Industry economists estimate that the market could eliminate as many as 600,000 active drivers, according to price reporting agency FreightWaves. The U.S. Bank Freight Payment Index – a measurement of quantitative changes in freight shipments and spending activity – had just reversed its short-lived Q2 improvement in the next quarter.
This unprecedented capacity purge threatens to bring spot rates to levels reminiscent of the COVID-pandemic era, FreightWaves reported. However, a crucial difference distinguishes this potential crisis from previous market disruptions.
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Policy Changes to Remove Thousands of CDL Holders
Policy changes, particularly regarding non-domiciled commercial driver’s licenses and English language proficiency requirements, are expected to remove between 5% to 12% of CDL holders from the supply chain over the next two to three years, according to J.B. Hunt Transport Services Inc. (NYSE:JBHT).
Freight Volumes Plummet 18% Year-Over-Year
Current market conditions paint a grim picture for the industry. Freight volumes have experienced a dramatic downturn since mid-2022, with year-over-year figures revealing an 18% decline, according to FreightWaves.
The sharp drop has created severe operational challenges for motor carriers struggling to secure loads and for freight brokers attempting to sustain their businesses with minimal volume, the outlet reported. The scarcity of available freight leaves minimal room for profitability in an already compressed market.
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The contract market offers little respite, as many brokers have committed to business at unsustainably low rates while competing against asset-based carriers, FreightWaves reported.
"Shippers paid more to move less freight in the third quarter—a clear signal that industry capacity is exiting," U.S. Bank Director of Freight Business Analytics Bobby Holland said. "While higher fuel prices played a role, it doesn't fully explain the increase in spending."
He added, "The impact of fleet exits is showing up in pricing, pushing rates higher even as volumes remain soft."
"The freight market faced renewed pressure in Q3, with areas key to the trucking industry like manufacturing, construction, and consumer goods spending showing signs of strain," American Trucking Associations Chief Economist Bob Costello said in U.S. Bank's report.
Volumes Drop 40% Since 2020 Peak
Shipment volumes decreased 10.7% in the third quarter from the same period last year, U.S. Bank reported. Following a peak in late 2020, volumes have fallen by more than 40%, with the most significant declines taking place during the previous two years. Shipper spending, however, demonstrates signs of stabilization, the U.S. Bank said. Across the most recent two quarters, spending has grown by a combined 3.2%.
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Small motor carriers confront additional pressures beyond market conditions. Those who have employed non-domiciled CDL holders may find these drivers unable to satisfy regulatory requirements, including the English language proficiency mandate.
Fraud Prevention Systems Create Barriers for Legitimate Carriers
The fraud problem has intensified significantly within the industry, FreightWaves reported. Criminals have successfully reverse engineered fraud prevention systems, leading to a sharp increase in fraudulent activity, the outlet said. Brokers, wary of falling victim to scams, have adopted stricter verification protocols and no longer override even minor compliance flags.
This heightened scrutiny can severely impact legitimate carriers who receive false positives in compliance verification systems, FreightWaves reported. Any carrier flagged by fraud mitigation systems can find themselves effectively locked out of participating in brokerage freight opportunities, creating an existential threat for struggling operations, FreightWaves said.
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