Truck transportation jobs had a relatively uneventful month in June. Although they continued to drop, it was ever so slightly this time, shedding just 100 and bringing the total job numbers to 1,548,600, according to the Bureau of Labor Statistics. In the air, Shein and Temu have become a headache for businesses leveraging air freight. The fast fashion giants continue to ship massive volumes of cargo between China and the United States, leaving no room for other companies to operate.
Read on to learn about these market trends and other intriguing events across the freight world.
A Minor Decline in Truck Transportation Jobs
The Bureau of Labor Statistics reported a 100-job decrease in the industry, bringing the total number of jobs to 1,548,600.
While the June decline is slight, it follows a trend of overall job reduction in the sector over the past two years. Despite the decline, there are signs of potential stabilization. The not-seasonally adjusted number of truck transportation jobs has increased over the past two months, reaching its highest level since February 2023. However, experts remain cautious, predicting a full rate recovery is not yet due until 2025. The average hourly wage for truck transportation workers also surpassed $30 for the first time.
Other transportation sectors also showed mixed results. Rail jobs increased slightly, reaching a level not seen since April 2020. Warehousing and storage jobs declined slightly but remained above April levels.
Shein and Temu Driving Spike in Air Freight Prices
The rapid growth of fast-fashion e-commerce stores Shein and Temu has led to a surge in demand for air freight from China.
With massive daily shipments equivalent to around 88 Boeing 777 cargo planes, the fast-rising e-commerce giant has significantly reduced available air cargo capacity coming out of Asia, specifically China. As a result, businesses are forced to wait longer and pay substantially higher air freight prices. Spot rates have doubled compared to 2019, and at this rate, it may only get worse. In a world where customers demand the shortest possible delivery time for their goods, Shein and Temu may be causing significant headaches for many of these businesses.
While Shein and Temu have secured long-term contracts to accommodate their needs, other businesses are facing the brunt of this capacity crunch.
LMI for June Shows Mixed Picture
In June, transportation capacity reached a neutral point, a strong indication that the freight recession might be coming to an end. However, capacity contractions are still abound.
The last time the Logistics Managers’ Index had a neutral reading was in March 2022, just ahead of the freight recession’s onset. Transportation pricing was up in June, though — the highest level since the same month in 2022 and experts believe it is because of the increased ocean shipping spot rates. Inventory levels also increased, although they remain at contraction levels, and inventory costs continued to expand but were lower than those of May.
Upstream firms are building inventory, potentially in preparation for peak season, while downstream firms are maintaining lean inventories. This is happening even as warehousing capacity and utilization are declining, which indicates potential challenges in storing increased inventory levels. Overall, the industry is still cautious about declaring a full recovery from the recession.
Weak U.S. Manufacturing Outlook Spells Trouble for Truckload Market
As the U.S. market freight downturn extends into its second year, the trucking industry keenly anticipates a shift to a bull market pricing cycle. However, several indicators suggest that this shift is unlikely to occur soon.
Domestic manufacturing, which generates about 59% of the demand for for-hire trucking, remains sluggish. Data from the U.S. Federal Reserve Board and the Institute for Supply Management (ISM) indicate persistent weakness, with new order data showing no significant improvement. The ISM’s new order data indicates future manufacturing output and remains in contractionary territory, failing to show the necessary expansionary readings to signal a market recovery.
Fixed investment in residential structures, including new constructions and improvements, remains down approximately 15% from 2021 levels, despite a slight increase from 2023. Given the Federal Open Market Committee’s stance on interest rates, significant cuts are not anticipated in 2024, dampening the prospects for increased capital investment.
Overall, the data suggests a substantial uptick in trucking volumes is unlikely in the second half of 2024, pushing the potential onset of a bull market pricing cycle to at least 2025.
Per-Mile Trucking Costs Hit a Record in 2023
The American Transportation Research Institute (ATRI) recently reported that the total cost of operating a truck reached a record $2.270 per mile in 2023 despite a decrease in fuel costs.
While this is a new record, the overall increase from 2022 was only 0.8%. Non-fuel expenses like truck and trailer payments, driver wages, and maintenance grew significantly. Premiums on trucking insurance also increased by 12.5%. This comes after two years of stability. All of these point to the impact of inflation on the industry. Deadhead mileage and driver turnover rates also contributed to higher costs. Despite the cost increases, the overall freight market experienced a decline in rates and shipments, reducing operating margins for trucking companies.
However, there are signs of potential stabilization in some cost areas for 2024.
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