10/16/23 08:40 AM EDT

Trucking on Lengthy Path to Normalization

Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

Today’s bonus chart tries to make sense of the trucking industry, obviously, transportation tells us a lot about demand in the economy and, by extension, employment for the greater economy.

In August, the BLS noted a decline of 36,700 truck transportation jobs, primarily attributed to Yellow Corp shutting down in late July. However, September witnessed a bounce back, with 8,800 trucking jobs added, totaling 1,584,500 jobs. Interestingly, the BLS also revised its initial August figures upward by 8,100, leading to a net gain of 16,900 jobs compared to the original August report. Trucking jobs are still down 24,700 from their cycle peak.

Here’s where it gets a little more interesting: despite the shifts, there remains a notable excess of trucking capacity compared to pre-pandemic levels. Truckload carriers are exiting the market at the fastest rate seen in 5 years. The announcement of the UAW strike saw a surge in trucking contract volumes as automakers and OEM part manufacturers hastened deliveries in anticipation. Yet, outbound tender volumes have now declined 12% since last month. This presents a scenario where excess capacity meets decreasing demand. Regarding rate change, trucking PPI has dipped 10.95% from its 2022 peak, but PPI inputs remain 29.02% above pre-pandemic levels. This indicates a lengthy path to normalization.

On a related note, warehouse employment appears to be on a consistent decline. In September, warehousing and storage jobs fell to 1,884,100, marking a decrease of 3,800 jobs. August's figures were also revised downward, resulting in September's warehouse jobs being 65,100 fewer than the same time the previous year.

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