The Freight Recession: Signs of Recovery and What It Means for the Industry

Over the past two years, the freight industry has endured one of its most prolonged, challenging periods ever, known widely as “The Great Freight Recession,” This recessionary market has been heavily driven by fluctuating consumer demands, rising fuel costs, and a tight labor market. We’ve seen the effects through a severe slowdown in freight volume, a dip in trucking rates, and business struggles across different shipping sectors.

However, this blog is not all about doom and gloom, recent signs and data indicate that this recession may finally be nearing an end. Some sources are even saying the great freight recession has ended. We’re a little more dubious to say that definitively, but we can definitely see the signs of future market stability. So, with these latest stats comes a great amount of optimism from freight companies and other businesses alike. Let’s take a further look at why we believe the freight recession is coming to an end.

Understanding The Great Freight Recession

The term “The Great Freight Recession” comes from the consistent decline in freight demand and freight volumes beginning back in 2021. The industry experienced a huge shift after the boom from the COVID-19 pandemic. Shopping soared during the multiple different lockdowns, as people simply didn’t have much else to do, and then once the world adjusted to the “new norm” and consumer spending shifted again, the transportation industry saw a rapid cooling-off period.

The shift was intensified by inflationary pressures and changes in consumer purchasing power, leading to a decrease in demand for goods and therefore a knock on effect to a drop in freight activity. With fewer goods moving through the supply chain, trucking companies, railroads, and other logistics providers began to feel the financial strain, marked by lower profits, higher operational costs, and, in some cases, workforce reductions.

Key Indicators of Recovery, Here’s the Proof!

Multiple key indicators are bringing hope to the industry and suggest that we are moving in an upward positive trajectory:

Rising Spot Rates and Contract Rates

Spot rates refer to the price of non-contractual shipments, and contract rates are the rates set over long-term agreements. Although many shippers won’t like to read this, maybe look away! These rates are showing a gradual increase from previous years, from $1.54 per mile in 2023 to $1.78 per mile today.  This increase suggests one of two things: there’s either been a surge in demand or a decrease in capacity available. Both of which align with the theory that the ‘Great Freight Recession’ is coming to an end.

💡 Tip: It’s important for shippers to keep up to date with spot rates to avoid being caught off guard by any sudden increases.

Tender Rejections Rising

Another key factor that potentially shows a tightening of the industry market, is the increase in rejected tenders. A tender may be rejected for all kinds of reasons but the main being, limited capacity, because of rising consumer demand. Meaning carriers can be more selective of the shipments they take on.

💡 Tip: We would recommend partnering with a fantastic broker. Tender rejections can be harmful to shippers, they can cause delays, financial losses and add an immense amount of pressure on the shipper to find a suitable carrier outside of their preferred ones. That’s why we suggest a broker. Brokers handle all of this on your behalf and find you an appropriate, cost effective carrier in the blink of an eye.

Impact From the Election

Since Trump won the Presidential election on November 5th, it’s not going to be a huge surprise if immediate demand in the shipping industry sky rockets. Since the tariff wars were such a huge topic in his manifesto, we’re likely to see businesses pre-stocking into the States in the very near future to avoid those increased tariff rates.

New FMCSA Clearinghouse-II Regulations

November 18th was a pivotal date in the trucking industry this year.  The date that the new Federal Motor Carrier Safety Administration (FMCSA) Clearinghouse-II regulations came into play. These new regulations will create a large-scale decrease in truck drivers as it’s estimated that around 177,000 drivers will have their Commercial Drivers License (CDLs) revoked. This only applies to drivers that have a “prohibited” status, if they still have this status on Nov 18th, then their CDL license will be downgraded. However, there are ways around this, once “prohibited” drivers complete their “return-to-duty” process, the state agency will restore the driver’s CDL privileges.

If the figures above are correct, then we will see a direct impact on capacity and a further tightening of the market. With fewer drivers on our roads, it’s not crazy to expect rates to increase with demand.

What Does This Mean For Shippers?

With the end of the freight recession hopefully in reaching distance, shippers are feeling both a sense of relief and are also anticipating new challenges. With market conditions stabilizing, it’s creating the opportunity for smoother operations and more predictable costs, as logistics companies are able to plan better for the future months. However, shippers must stay proactive to maintain a competitive edge and should be considering the following:

🤝 Carrier Partnerships: A recovering market, especially one with factors like; fewer drivers, can mean tighter capacity. Building strong relationships with carriers can help you to secure capacity, even during high-demand periods.

📈 Market Trends: Freight markets remain unpredictable to a certain degree and can change quickly. Keeping a close eye on market developments allows shippers to adjust their strategies and act on new opportunities and minimize potential risks.

🚚 Optimize Your Supply Chain: Assess your supply chain strategy. Leveraging tools like transportation management systems (TMS) can boost efficiency, and reduce costs.

💰 Prepare for Shifts: Securing stable rates and diversifying your carrier network can help to reduce the risks of disruptions.

Looking Forward

Increasing tender rejection rates, rising spot prices, and shrinking capacity all signal that stabilization is on the horizon. While the recovery may be gradual, these shifts suggest a positive change for the transportation industry, which has endured significant challenges over the past few years.

This is a time for shippers to act strategically. Strengthening carrier relationships, staying informed about market trends, and optimizing supply chain operations will be crucial in navigating the evolving freight market. Making sure you’re prepared for potential capacity constraints and rate fluctuations is also key to staying competitive in this dynamic market.

 

Need help with any of your specialized or expedited shipments in a recovering freight market?

Today can be the day you stop struggling with shipping problems.

At PEI, we’re experts in dealing with specialized freight and can handle yours with any custom requirements.