In a normal year, you’d expect truckload rates to be rising fast and high by the middle of June. And rates are rising, in fact, but this is not the sharp peak that most truckers were hoping for. Not yet, anyway.
Good News: Jobs and Harvests
The U.S. added 2.5 million jobs in May, an encouraging sign. The unemployment rate improved, but only to 13.3%, which is still very high. The Federal Reserve predicted that nationwide unemployment won’t dip below 9% before the end of the year, compared to the 3.5% rate that prevailed before COVID-19 arrived.
The good news is that as most U.S. states and metro areas re-open, shoppers are returning to stores to spend their new salaries or their COVID bonuses, just as produce season is kicking into high gear in Central California and the Southeastern states. As long as those trends continue, they’ll build demand for trucking, which typically supports higher rates.
In fact, DAT reported last week that the load-to-truck ratio for dry vans jumped back up to 2.9 loads per truck, as a national average. That’s a big jump from 1.91 in May, and the ratios are starting to look more like 2019. It wasn’t a good year, but it was a heckuva lot better than the last two months.
DAT also reported that the national average rate rose to $1.75 per mile for vans, including fuel, for the first half of this month. Again, that’s not great, but it’s a big improvement. Ratios and rates are trending up for flatbeds and reefers, as well, but not quite as dramatically.
Texas is Hot for Vans
Several markets and lanes in Texas were hot spots for van freight last week, according to DAT. Some of the heat was probably due to the clean-up following Tropical Storm Cristobal, which buffeted Texas, Louisiana, and Mississippi with high winds and torrential rain, before heading north into Missouri and Ohio.
In Cristobal’s wake, lanes from Texas to Louisiana and back got the biggest price boost. DAT reported:
- Houston to New Orleans gained 23 cents to $2.46
- Dallas to New Orleans added 24 cents, to land at $2.04
- The return trip from New Orleans to Dallas added 17 cents to $1.83
Bad News: Small Businesses Won’t Re-Open
Unfortunately, those rising trends won’t necessarily continue. Produce season doesn’t last forever, even in a good year. In fact, the impact of harvest on reefer and van rates usually tails off right after the Fourth of July.
Plus, parts of the economy may not re-open any time soon, if ever. Small business owners may not have the resources to staff up and replenish inventories after a revenue-free hiatus of three or four months.
Hospitality-related industries were hit hard in the last few months, as travel and tourism ground to a halt. Hotels, restaurants, bars, casinos, amusement parks, airports, and commercial flights lost nearly 8 million jobs in April alone, including 5.5 million food service workers. Add manufacturing and service jobs, and the positive May employment report seems a lot less significant.
Those millions of laid-off and furloughed workers cut back on purchases, as did the thousands of businesses that were shut down. All those freight flows dried up, and it could be a long time before they return to pre-COVID levels.
Going forward, millions of Americans will go back to work, and the economy starts to recover. Freight volumes will increase, but it won’t be a smooth ride, and trends probably won’t follow the typical seasonal patterns.
Every week brings a new trend, so stay tuned to Freight Broker Live and stay up-to-date on the fast-changing freight economy.