If you have been mystified by the resilience of trucking employment in the face of a prolonged freight recession, it turns out there was a simple explanation: The jobs figures were overly robust.

Don’t say we didn’t warn you. We have been pointing out the likelihood of a downward revision in the employment estimates since October when we delved into the data from the Quarterly Census of Employment and Wages (QCEW). As we explained in October, the QCEW represents a more comprehensive accounting of jobs than the Bureau of Labor Statistics can achieve with its monthly Current Establishment Survey (CES).

The QCEW data we reviewed in October was current only through the first quarter of 2024, but the figures for the second quarter released in December showed an even bigger gap between the CES and QCEW estimates for June of last year.

The annual BLS benchmark revision of payroll data released in February paints a greatly different picture of trucking employment, especially in truckload. Moreover, a recent strengthening of employment in trucking suggests a possible bottoming out.

Despite these encouraging data points, capacity apparently still exceeds what freight demand dictates. The number of active drivers is a headwind for recovery, but the distribution of active capacity also might still be disrupting the market.

A Greatly Changed Picture For Truckload

The benchmark revision for truck transportation shows 27,800 fewer jobs in December – the most recent month for which there is comparable data – than reported initially. Rather than being 1.7% above the pre-pandemic month of February 2020, the revised data shows trucking jobs at just 0.3% higher.

Significant revisions are not unusual. Last year’s benchmark revision for trucking was even larger at a reduction of 33,000 jobs. However, more than half of last year’s revision – 16,600 jobs – was in local general freight trucking. BLS showed only 6,000 fewer jobs for general freight truckload.

The latest revision was a much bigger deal for truckload, however. BLS reduced its estimate for truckload by 22,200 payroll jobs, which is roughly what the preliminary data we reviewed in October suggested would be the case. The revision means that rather than being 4.3% higher than February 2020 levels, truckload payroll employment is up just 0.5% from that pre-pandemic month.

The speed of the truckload employment reduction is as remarkable as the size of the revision. In May 2023, seasonally adjusted payroll employment was just 3,000 jobs below the all-time high of 553,100 in October 2022. By June 2024, the seasonally adjusted level was 520,800, a drop of 29,300 jobs from May 2023. That’s a steep decline, although it is not as steep as the 38,100-job run-up over the same period of time leading to the October 2022 record.

The benchmark revisions for other trucking sectors were not as large but were significant. Local operations saw downward revisions of around 10,000 payroll jobs while LTL’s employment was revised higher by about 13,000 jobs. The smallest change among the major sectors was in long- distance specialized trucking, which saw an upward revision of just 1,300 jobs.

Signs of Tightening?

With the significant downward revision in job estimates, you might overlook an important point: Trucking has been adding jobs recently, seasonally adjusted. Preliminary data shows an increase of 7,400 jobs during November through January. The December uptick was a mere 300 jobs, but the seasonally adjusted data had not shown back-to- back monthly increases since July 2022 let alone three straight gains.

We do not know exactly which trucking sectors are behind this recent firming because the largest increase – 3,800 jobs – was in January, and the more granular data lags by a month. However, preliminary data for November and December shows truckload and local specialized payroll employment up around 4,000 jobs each with declines elsewhere.

Before we declare an inflection in the market, though, understand that the latest data is subject to monthly revisions. Still, the apparent firming is good news for carriers, although the capacity overhang remains an issue until the market sees sustained freight growth.

The Resilience of Small Carriers

Despite the annual benchmark revisions that incorporate more comprehensive data, payroll employment in trucking is only partially reliable as a proxy for driver capacity.

One issue is that payroll employees are not the same as truck drivers, although payroll employment figures probably do capture changes in employee driver employment well. Truck drivers account for a majority of trucking payroll employees – especially so in truckload – and their ranks are most susceptible to rising and falling with freight demand.

The real blind spot is the universe of drivers who operate outside the payroll environment: Leased owner-operators and very small carriers operating under their own authority.

Before the huge distortions wrought by the pandemic, we did not worry much about his blind spot as our analysis suggested that the population of non-payroll drivers generally rose and fell in concert with the ranks of payroll drivers. This dynamic changed dramatically beginning with the post-lockdown period in the middle of 2020.

We have written and spoken dozens of times about this distortion and the factors that created it, so we won’t rehash that here. The bigger issue now is that the number of active trucking firms – a metric driven overwhelmingly by very small operations that largely are invisible to payroll employment tracking – has not dropped as rapidly as payroll employment has.

Sure, the for-hire carrier population has dropped significantly from the peak in the fall of 2022 when the market had nearly 131,000 (about 51%) more carriers than it did in February 2020 immediately before the pandemic. The market still has around 89,000 (nearly 36%) more carriers than it did in February 2020, however. Payroll employment has virtually normalized; the carrier population has not.

No single issue accounts for this resilience. Some of it, no doubt, is due to the financial cushion afforded by extraordinary spot rates from mid-2020 through early 2022. According to Census Bureau data, non-employer trucking firms saw revenue growth of 8.6% in 2020 – a year in which employer firms saw a 0.7% decline in revenues.

Both groups had a great 2021, of course, although non-employer firms slightly outpaced employer firms with revenue growth of 20.7%, according to the Census Bureau data. In 2016, non-employer firms accounted for about 17% of total truck transportation revenues. By 2020, they represented about 20%. That share persisted at least through 2022, which is the latest year for which this data is available.

Numerous other factors have contributed to small carriers’ resilience:

• Government support through stimulus payments, forgivable loans, etc.;
• Legal pressures weighing on the leased owner-operator model (i.e., California’s AB 5 law);
• Improved technology allowing very small carriers and brokers to work together more productively;
• Forbearance reportedly offered by equipment lenders uninterested in repossessing trucks and trailers in the current market;
• Reluctance of many financially stressed small carriers to leave the market before they can benefit from an expected recovery.

These more recent trends add to the longstanding flexibility bolstering many very small operations because they do not have the overhead and obligations that larger carriers do. That flexibility might be even greater if, for example, a single-truck operator has a spouse with a job and benefits.

These factors, along with more stability in private fleet operations than in for-hire, gives us an active Class 8 population that is not much smaller than it was at the peak in 2023Q2, according to FTR’s reckoning. We estimate the population of Class 8 trucks with active drivers in 2024Q4 at only about 2.5% below that peak level, seasonally adjusted, with an expectation that the fourth quarter of 2024 represents the trough. FTR’s estimate is that active Class 8 capacity currently is close to 4.5% above the 2020Q1 level.

Our methodology for this estimate is wholly unrelated to data supplied to the Federal Motor Carrier Safety Administration by carriers themselves, but it doesn’t look much different from the pattern reflected in reports from for-hire carriers. FTR’s analysis of FMCSA registration data suggests that for-hire driver capacity bottomed out between July of last year and this January. However, carriers are required to report only every two years.

Therefore, a snapshot today of the data reported to FMCSA might not fully capture the drop in employment that occurred mostly during 2023. In any case, a bottoming out this fall would square with the pattern seen in payroll employment data.

Awaiting Stronger Freight

Among the numerous market changes over the past five years or so is greater visibility and connectivity between brokers and their small carrier capacity providers. As noted earlier, this trend likely is a factor in small carriers’ resilience because it helps operators reduce empty miles and increase productivity. However, greater productivity also acts as a discipline of sorts on spot rates.

Small operators can offset some of the pain of weak spot rates by maximizing their freight opportunities, which presumably means that the spot market can absorb more freight without as many hiccups. Over the past couple of years, the spot market has seen typical seasonal and weather- related bumps, but nothing has really moved the market in a sustained way.

The consequences might be more far-reaching than the spot market, however. Greater integration of and insights into capacity providers have bolstered brokers’ ability to compete for route guide freight in addition to being the go-to providers for covering exception freight. The result might be greater effective capacity available to shippers than what you might assume based on employment levels at asset-based trucking companies.

With no catalyst seemingly on the horizon to force more than a steady but slow drain of small carrier capacity, trucking companies desperately need a stronger manufacturing sector, which generates considerably more freight than wholesale and retail.

Several recent indicators are encouraging, including a stronger Institute for Supply Management manufacturing index and rising new orders for core capital goods. Unfortunately, an intense focus for months over potential tariffs raises questions about how organic these green shoots might be. We will be watching closely for signs that the industrial sector has begun a sustained recovery and isn’t just trying to get ahead of impending tariffs.

Want to dig deeper with Avery Vise or an FTR Expert? Schedule a Complimentary Market Update Call today! 

These sessions are a great way to get some time with the FTR experts, dissect the forecast, and understand what pivot points to watch out for at a deeper level.  

Reach out to our client relations team to find a time slot that works for your team! crt@ftrintel.com – or – 888.988.1699 ext. 2.

Like this kind of content? Subscribe to our "Food For Thought" eNewsletter!

Now more than ever, professionals consume info on the go. Distributed twice monthly, our "Food For Thought" e-newsletter allows readers to stay informed about timely and relevant industry topics and FSA news whether they're in the office or on the road. Topics range from capacity, rates and supply chain disruption to multimodal transportation strategy, leveraging technology, and talent management and retention. Learn More