Q2 Data Highlights Capacity Cuts at Large US Truckload Carriers

Large US truckload carriers cut further into their truck counts, reducing their capacity in the second quarter, according to a final analysis of JOC Truckload Capacity Index (TCI) data. Carriers in the JOC index group cut their capacity 4.4 percent year over year, pulling the second-quarter index down 3.9 points year over year and 1.8 points from the first quarter.

That 4.4 percent reduction in capacity is the deepest for the TCI since a 4.5 percent cut in the first quarter of 2010. The highest year-over-year reduction for the index, 8 percent, occurred in the first quarter of 2009, in the midst of the Great Recession.

The 82.8 index reading for the last quarter brings the index back to its level in the second quarter of 2018. The index, which measures capacity at a group of large, publicly owned truckload carriers, rose 7.1 points over the course of 2018 before peaking at a reading of 87.3 in the first quarter of 2019. Since then, the TCI has dropped 4.5 points, including 2.4 points in 2020.

The final data was released after a preliminary analysis showed a slight bump in capacity at large truckload carriers. Data received later showed additional deep cuts that pulled the index reading down. The final data also aligns better with reports of tighter capacity across the US transportation landscape, from the truckload and less-than-truckload (LTL) to intermodal sectors.

The data also supports anecdotal evidence that large truckload carriers are holding a line on adding capacity despite increased demand. “Carriers aren’t necessarily adding more trucks and hiring more drivers because they don’t know what conditions are going to be like a few months from now,” said Dean Croke, senior analyst at DAT iQ, a division of DAT Solutions.

Typically, trucking companies immediately order more trucks during an economic upswing, as they did when freight demand surged in 2018, Croke said in a recent interview. When the US economy cooled in 2019, that left carriers with extra capacity. “It’s fascinating to see where we are today and to think five months ago we had excess capacity,” he said.

As large truckload carriers face uncertainty about the economic recovery and the coronavirus disease 2019 (COVID-19), Croke believes they will keep capacity constraints in place, giving them pricing leverage, and focus on how to serve their core customers while defending and building their profitability until forecasts for the US economy become clearer.

The large truckload carriers in the JOC TCI index have cut their capacity 5.3 percent since the first quarter of 2019. The index indicates their capacity level is still about 18 percent below its peak in the fourth quarter of 2006. A significant amount of capacity at large truckload fleets was eliminated by the recession of 2008-09, and in the past decade, smaller fleets gained capacity.

Smaller fleets, especially those with one to six trucks, have added both tractors and drivers since the Great Recession, US government data show, pointing to an underlying shift in capacity away from the largest carriers and to a more fragmented smaller carrier market. That may account for some of the difficulty larger fleets have attracting and keeping drivers.

From February through April, unadjusted trucking employment numbers fell 92,800 jobs, according to data from the US Bureau of Labor Statistics (BLS). For-hire trucking companies have recovered 52,200 jobs since April, but unadjusted August payroll numbers were still about 36,600 jobs short of this year’s peak of just over 1.5 million employees in February.

What’s more, the unadjusted trucking employment figure for last month was 1.45 million, 85,800 jobs below the for-hire trucking employment level in August 2019. That translates to a 5.5 percent year-over-year decline in trucking employment, a gap that is contributing to the capacity shortfall shippers are suffering and rising spot and contract truckload rates.

Source: Journal of Commerce