Trucking Economist Predicts “A Lot of Trucking Failures” Coming Soon Due to Pandemic
Arlington, VA – As widespread mitigation policies to contain the spread of the coronavirus continue hitting the United States economy with unprecedented ferocity, a prominent trucking economist says it’s “going to get ugly” for many trucking companies.
On Friday, Bob Costello, chief economist for the American Trucking Associations (ATA), did not sugarcoat what he expects will likely happen over the next few months as federal guidance, along with state and local “stay at home” orders, grind much of the U.S. economy to a screeching halt.
During a webinar hosted by the Council of Supply Chain Management Professionals (CSCMP), Costello painted an alarming and bleak picture of what the next few months could look like for American businesses.
“We are in a recession and it is going to be deep at least for a quarter,” he said. “The second quarter GDP… you can expect that to decline at an annual basis of up to 20%.”
To put that into perspective, he compared that projected decline to the worst quarter during the Great Recession of 2008, which was an 8.4% reduction occurring in Q4.
“The vast majority of businesses are going to hurt and hurt badly,” Costello warned. “I would expect a lot of trucking failures. I hate going out and saying that, but I think you need to know that.”
While some fleets hauling essential goods, especially in the grocery sector, have seen dramatic increases in freight, Costello cautioned demand is beginning to slow down.
“Most fleets are saying it is slowing down. Freight demand is going to be off significantly,” he said.
To this point, FreightWaves’ freight tracking tool, Sonar, reported only one of the 15 major freight markets it tracks saw an increase last week on a week-over-week basis.
The biggest markets in decline were Cleveland, OH (-21.46%), Fresno, CA (-18.58%) and Laredo, TX (-17.47%).
Analysts also indicated the recent peak volumes spurred by consumer panic buying are likely over.
Costello pointed specifically to restaurants and auto suppliers as the biggest losers during the pandemic.
He warned that the transportation businesses supporting those industries are at increased risk of failure.
For the trucking companies that do survive the coming months, Costello said many of those carriers will be forced to make some difficult decisions.
“As freight plummets, some of these carriers are going to be forced to lay off drivers.”
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Though the trucking industry has been largely insulated from the unprecedented number of jobs lost in the last two weeks, Costello indicated that will likely change in the coming weeks.
More than 10 million Americans have filed unemployment claims in the last two weeks, which is unprecedented in U.S. history.
According to Bureau of Labor (BLS) statistics released on Friday, the U.S. economy shed more than 700,000 jobs in the first two weeks of March before officials stopped counting.
On Saturday, in an appearance on FOX News, Secretary of Labor, Eugene Scalia, said the Department suspended counting job losses in mid-March and will report those losses on next months report.
He indicated April’s losses will be significantly worse.
According to the BLS, the transportation sector lost nearly 5,000 jobs in March, with trucking only shedding 200 jobs after gaining 1,200 in February.
Costello noted the Federal government has taken historic action in recent days passing three phases of stimulus and relief packages in an effort to stem the decimating tide.
However, most economists agree those relief measures will take some time to be felt by many consumers and businesses which will result in a further loss in consumer confidence and spending.
Costello did express optimism that the nature of the economic turmoil could result in an accelerated, or v-shaped, recovery beginning in Q3.
“This is not an economic crisis. This is a health crisis. If we can get past the health part of it, hopefully we can get a v-shaped recovery,” he commented.
Still, he conceded it’s anyone’s guess when that will be.