The freight market has been in a prolonged downturn, leaving many in the industry wondering when a recovery might finally arrive. For nearly two and a half years, spot and contract rates have remained stubbornly flat, creating a challenging environment for carriers and shippers alike. Despite numerous predictions of a turnaround, the market has defied expectations. To understand where we are and where we might be headed, it's crucial to look at both the supply and demand sides of the freight equation.

A conversation with Mazen Danaf, Principal Economist at Uber Freight, and industry expert Samantha Jones, sheds light on the complex dynamics at play.

The Great Supply Correction

For a long time, data from the Bureau of Labor Statistics (BLS) suggested that trucking employment was stable, with carriers maintaining their headcount. However, recent significant revisions to that data have painted a drastically different picture.

"The number of employees in the truckload sector is much lower than what we initially expected," Mazen Danaf explains. "Capacity is still exiting the market in significant amounts".

In fact, truckload employment has now dipped below pre-pandemic levels, a clear sign that the excess capacity that flooded the market post-COVID has been flushed out. This aligns with what many brokers and industry insiders have been feeling anecdotally for months: carriers are closing their doors and drivers are leaving the industry.

Why is this happening? The economics are simple and stark. According to an index developed by Uber Freight that calculates the total cost per revenue mile, carriers are losing significant money. “Carriers are losing a lot of money on the spot market,” says Danaf, estimating they lose about 20 cents for every dollar earned. Even contract carriers are feeling the squeeze as operating costs begin to exceed contract rates.

Carriers have tried to adapt by:

• Pushing equipment harder: The average annual miles per truck increased from 80,000 in 2023 to 83,000 in 2024.
• Hiring drivers at lower wages: Truckload sector wages have fallen 1.5% year-over-year, while wages in the broader economy have grown by about 4%.
• Delaying new investments: Orders for new tractors and trailers are at their lowest levels since the start of the pandemic in 2020. Year-to-date, trailer orders are down over 30%, and tractor orders are down over 15%.

These are short-term survival tactics, not sustainable solutions. As long as costs remain higher than rates, capacity will likely continue to exit the market.

A Disconnect Between Consumer Spending and Freight Demand

One of the biggest puzzles of this freight recession has been the resilience of the American consumer. If people are still spending, why aren't trucks busy? The answer lies in what they are buying.

Danaf points out a critical divergence:

• Spending is up in sectors like electronics, pharmaceuticals, and personal care products. These are typically high-dollar, low-volume goods that don’t generate much freight.
• Spending is down or below trend in sectors like furniture, appliances, food, and beverages. These are low-cost, high-volume goods that are the lifeblood of the trucking industry.

"That's why this strength that we see in consumer spending in the dollar amount...does not translate to the freight market," Danaf notes.

This trend is compounded by weakness in the manufacturing and housing sectors, which are major drivers of freight volume. Until these key areas recover, a significant rebound in demand remains unlikely.

Looking Ahead: Cautious Optimism and Technological Shifts

So, what should the industry expect in the next three to six months? The signals are mixed. While demand remains depressed, the significant exit of supply means the market is becoming more balanced. “The risk to the upside is higher than the risk to the downside,” Danaf advises, urging shippers to be cautious and prepared for potential market changes.

Further on the horizon is the promise of autonomous trucking. Once seen as a distant future, autonomous technology is advancing rapidly, thanks in part to breakthroughs in AI. While Samantha Clay notes it felt like "this thing of the far future" just seven years ago, we are now getting much closer.

Danaf is more optimistic than ever, stating, "Right now we can confidently say that it is two years from now". With ride-hailing services already deploying driverless cars in some cities, the path for autonomous trucks is becoming clearer. Initial deployments will likely focus on hub-to-hub models, though challenges around unit economics and facility readiness remain. Proponents argue the technology will be safer than human drivers, as data shows 95% of accidents are due to human error.

For now, however, the industry must navigate the present challenges. The key takeaway is to remain adaptable and informed. As Danaf wisely suggests, it's essential to be a "fox"—someone who considers a broad range of indicators and viewpoints—rather than a "hedgehog" focused on a single idea. By synthesizing diverse data points and expert opinions, businesses can make smarter decisions and better prepare for whatever comes next.

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