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January 2022 Trucking Market Update

Every month Jason Miller will release a Trucking Market Update covering demand conditions, supply conditions, and price as it pertains to the trucking industry. In addition, each month will feature bonus content consisting of Jason’s thoughts on a new topic beyond the “big three” categories.

Demand Conditions

Demand for for-hire truck transportation exhibited an uptick on a seasonally adjusted basis in the fourth quarter of 2021 based on the for-hire trucking ton-mile index, an index assembled by Yem Bolumole at the University of Tennessee and myself based on linking output from 41 freight generating sectors identified from the Commodity Flow Survey. We utilize this index to measure demand because it is benchmarked against the Census Bureau’s Quarterly Services Survey and, as shown below, shows movements that are nearly perfectly correlated with these data. My expectation going into 2022 is that demand will remain strong given manufacturing supply chains should begin to unsnarl once the omicron variant runs its course of the coming months. Manufacturing still accounts for the majority of for-hire trucking ton-miles, so a return to more normal operations should be good for carrier volumes. 

Supply Conditions

Despite much discussion of a truck driver shortage, employment in the various subsectors of truck transportation has improved markedly since the second quarter based on data from the Bureau of Labor Statistics. As shown below, in May 2021, employment for the entire sector was 55,500 employees less than in May 2019, with pronounced gaps in general freight, long-distance, truckload (down 23,900 employees) as well as general freight, long-distance, less-than-truckload (down 12,900 employees). As of November 2021, the gap had closed substantially, with general freight, long-distance, truckload employment being 6,400 less than two years ago, whereas the LTL employment was down just 900 employees. Looking at subsector employment data over time, general freight, long-distance, truckload employment has shown substantial gains since May 2021, with 21,000 employees added between May 2021 and November 2021. For reference, during the bull market of 2018, there was an increase of 18,200 employees between May 2018 and November 2018.

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My preferred pricing data to understand industry-level prices come from the Bureau of Labor Statistics’ producer price index program. For users of truckload freight, the two most relevant indexes are those for general freight, long-distance, truckload (primary services) and specialized, long-distance truck transportation. Price movements show just how much more capacity tightness the dry van sector has experienced, with prices as of December 2021 being up 35.2% from those observed in 2019. In contrast, prices for specialized, long-distance carriers have risen 14.0% over the same period. One convenient index readers may want to consider that is weighted about 55% for general freight, long-distance truckload, 25% for general freight, long-distance, less-than-truckload, and 20% for long-distance specialized in the long-distance motor carrying producer price index.

Bonus Content: Degree of Supply Chain Pressure

Each release, I hope to provide commentary on a topic beyond trucking demand, trucking employment, and price. For this month, I want to focus on the topic of measuring supply chain pressure. Recently the Federal Reserve Bank of New York released an index of global supply chain pressure. However, as there have been some concerns expressed about this index, I have developed an alternative that uses data from the Census Bureau’s Quarterly Survey of Plant Capacity Utilization regarding the extent “logistics/transportation constraints” and “insufficient supply of materials” have affected manufacturers’ operations. This in, shown below, shows that supply chain pressure is about 337% worse in the third quarter of 2021 than it was in 2018. I will be watching this index closely over the coming months to ascertain if/when supply chain pressure begins to relax.

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