America is heading for a downturn again. The economic numbers always show that the trucking industry is a leading indicator of the rest of the US economy since more than 70% of America's freight is moved by trucks. From wars abroad and pandemics to manufacturers producing less, many factors created a turbulent recession that struck the giant US Trucking Industry. On the other hand, these ominous signs in the trucking industry don't necessarily mean that the rest of the country's economy is on a crash course, as the freight industry is known for going into recession twice as often compared to the general economy. Yet, the impact is undeniable, and here you will see how an $800+ billion industry feels the effects of recent worldwide events & inflation and who is paying the price the most.
Trucking Companies Still Going Bankrupt at Mass
Let's start with positive news; contrary to the "trucking bloodbath" of 2019, there has been no surge of major firms filing for bankruptcy in the trucking industry. Instead, trucking companies appear to be interested in growth and expansion. Hiring has increased based on federal data that monitors pre-employment queries for commercial drivers.
However, as of this new decade, the US Trucking industry still sees plenty of companies filing for bankruptcy. Many of these companies with truck driver count above 20.
According to Freight Waves, On April 22, Marvin Keller Trucking, based in Illinois, declared Chapter 11 bankruptcy, despite being established in 1965 and, as per a database maintained by the Federal Motor Carrier Safety Administration, still being in operation. In the bankruptcy filing, the company's president, Joseph Keller, cited an inability to cope with rising fuel costs, wages, and other operational expenses.
Thousands of Jobs Swept Away
Alongside bankrupting companies comes a devastating follow-up of unemployment, leaving thousands of truck drivers without a job, adding an already decisive punch to the US Trucking Industry's shortage of drivers.
Following various federal reports and news, it is confirmed that truckers are losing their jobs by the thousands due to the recession.
However, to understand the bigger picture, The Transportation Department estimates that some 300,000 truck drivers depart yearly for various reasons.
Positive Signs in Wages
A significant income sinking struck some companies, such as USA Truck Inc. The company says one of the main culprits is declining spot rates by as much as 18%, resulting in USA Truck Inc.'s net income sinking from $2.5 million in the second quarter of 2018 to a shocking $1,000 profit by the second quarter of 2019.
However, wages are one of the few positive signs in the trucking industry today. In 2022, the average truck driver's salary was $71,000, meaning that truck driver earnings jumped 65% in 4 years! The average wage growth is expected to continue.
Conclusion: The Inflation Impact
Inflation has hit the trucking industry hard, resulting in record-high fuel prices and increased consumer prices. According to the Bureau of Transportation Statistics, between January and June 2022, the cost of regular motor gasoline increased by 49%, while diesel fuel prices rose even more significantly, at 55%.
Despite the government's efforts to limit inflation to a 2% target, the prices of goods, food, and transportation have exceeded this range. As of October 2022, the US inflation rate is 8.1%, while real GDP growth is only 1.6%.
The International Monetary Fund's research suggests that these price hikes could have long-term effects.