January Market Update
What’s happening in the truckload market so far in 2021?
Last month we discussed how slowing retail sales would not translate into reduced demand for transportation. With inventories at historically low levels, even if consumer spending continues to decline, there will be a period of restocking that will keep demand elevated well into the second quarter of this year. This restocking period will also be a boon for U.S Manufacturers. In December, factory output rose 0.9% from the prior month after a 0.8% gain in November.
We also reported last month that Class 8 truck orders in November hit the third-highest total on record. The trend continued in December with 52,100 units ordered — the fourth-highest total on record. This glut of additional capacity could have the effect of normalizing the balance between supply and demand. The biggest question is whether there will be enough available truck drivers to fill the seats.
The American Trucking Association (ATA) reported in 2018 that the trucking industry was short 60,800 over-the-road (OTR) drivers. The ATA projects that if the current trend continues, the shortage could surge to over 160,000 within the next 8 years. The ATA’s Chief Economist, Bob Costello, estimates that we have approximately 500,000 OTR drivers in the United States. A shortage of 160,000 on a base of 500,000 represents a significant challenge for the trucking industry.
The pandemic has only exacerbated the driver shortage. Many truck driving schools have either closed or are operating at reduced capacity. Stricter drug and alcohol testing mandates along with an aging driver population are also contributing to the shortage. To combat these headwinds, many carriers are increasing pay to attract and retain drivers.
Truck drivers have always been the unsung heroes of the American economy. The hours are long, and the work is tough. This fact has become increasingly apparent over the last year. While the country was hunkering down to slow the spread of Covid-19, truck drivers were working hard to ensure that critical supplies reached their destination on-time and intact. Regardless of the economic forces that play out in the coming months, the role of the truck driver will continue to be of critical importance.
As a logistics company with owned assets, we’re able to offer capacity from a variety of sources: our LTL carrier ABF Freight®, our Panther Premium Logistics® fleet, and our network of more than 40,000 prequalified carriers. Whether you want to build a lasting relationship with a logistics partner, you’re struggling to find capacity, or you want to be proactive about peak season demand, we can help.
With a combination of advanced supply chain technology and an experienced customer solutions team, ArcBest is equipped to find ways to solve even the toughest logistics problems. Learn more about our wide range of services.