Spot market data indicates that the acute shortage of U.S. trucking capacity is just about over. Prices began to decline in January, after the holiday season and they have continued to do so. Shortages of drivers also appear to be diminishing. Recent reports about the time it is taking to unload ocean shipments provide similar signals.
Real-time data suggests that one major cause of supply chain headaches in the United States — a shortage of available trucking — is coming to an end. But it also is signaling that the economy could be at an inflection point.
The trucking market is a leading indicator of U.S. economic activity. When production and consumption go up, so does the demand for transporting goods. Consequently, there is great value in tracking trucking activity and pricing, especially that of the spot freight market, the portion of the market for which the participants negotiate an individual transaction for each load. Market makers such as Truckstop.com, where two of us work, collect millions of data points on this activity a week.
Truckstop.com data shows that there was a dramatic increase in spot freight market rates immediately following the February 2020 Covid-19 pandemic shutdowns. That upcycle peaked in early January 2022, at the end of the last holiday season. At that point, prices began to decline, which has continued — even though the spring season traditionally has been a period during which prices increase. This data is the first indication that the two-year-long trucking crisis is almost over.
In addition, this data implies that the widely-reported driver shortages are diminishing. Shippers no longer have to compete aggressively price-wise in the spot market to get truckers to move their products to market. (Contract freight prices are still increasing, but historically, they have lagged spot freight prices by as much as six months.)
Recent reports about the time it is taking to unload ocean shipments provide similar signals. On January 21, 103 cargo ships were waiting to be unloaded in the Port of Los Angeles; in early May, that number had plummeted to 39. Similarly, the average price of shipping a container fell between September 2021 and March 2022 by more than 20%, indicating an increase in available container capacity. While some of the easing reflects the Chinese lockdown due to the pandemic, most of it is due to availability of trucks and the recent efficiency-improvement efforts of the Port of Los Angeles.
Truckstop.com data also provides evidence of an inflection point in U.S. freight demand. It peaked in late February 2022, and then began to move downward in early March — even though the spring is a time when the posting of loads on Truckstop.com normally expands. Brokers, the people who post these loads, are apparently getting fewer requests for trucks from shippers.
While the extraordinary U.S. trucking capacity crisis and related major increases in trucking prices appear to be ending, prices are unlikely to return to their pre-pandemic levels due to cost increases, such as higher driver wages.
The trucking data also gives us a tantalizing hint of how the U.S. economy if faring. The freight-demand data indicates that the remarkable expansion of the overall economy that began in mid-April 2020 ended in early March 2022.
Will the economy simply return to normal or is this the beginning of a recession? That is still unknown, and what happens will be affected by challenges to global supply chains, including the duration of the lockdowns in China, trade tensions between the United States and China, the war in Ukraine, and the moves that companies decide to take to make their supply chains more resilient, despite the higher costs. We expect that, in the short run, some or all of this increase in costs will be transferred to consumers, affecting consumer behavior and the economy.