December 2024
Signal Color: Yellow
Our signal color this month is moving to yellow from green as current market stability could be disrupted by emerging catalysts such as proposed tariffs, stricter immigration enforcement, and possible stricter work-visa policies.
Market Status
Sentiment in the truckload market is increasingly optimistic as fundamental metrics are stabilizing and improving compared to last year.
Phase Two of the Drug and Alcohol Clearinghouse may affect driver availability but won’t resolve long-term market challenges of supply and demand.
Key Trend
DAT Dry Van Linehaul Spot Rate Data analysis indicates that we are at the very beginning of a new freight cycle.
Shippers now face smaller discounts for contracted freight and higher spot rates, when compared to last year, indicating an upward price trend.
Seasonal Advice
Expect typical rate increases leading up to December holidays.
Companies should assess their current transportation strategies in anticipation of future market disruptions.
Fuel
There are no significant updates at this time and prices remain below $4 per gallon
Employment and Regulatory Impact
BLS Statistics
The Bureau of Labor Statistics (BLS) reported a slight decline of 100 for-hire trucking jobs for the second month in a row. After an increase of 1,400 jobs from July to August, this is an indicator that the amount of trucking jobs is slowly stabilizing. As this data includes both LTL and all For-Hire Truckload Jobs it is an approximate way to gauge how trucking jobs are trending overall. Compared to last year BLS reports that the current workforce is 20,000 below October 2023, indicating that the overcapacity of carriers in the market is continuing to exit slowly.
Clearinghouse
On November 18th, the FMCSA began to move forward with the second phase of their Drug and Alcohol Clearinghouse. The first phase that went into effect in January 2020 required Employers to search the database to see if their current and future employees had a violation before they let them drive for them. It also required them to conduct an annual search on all the drivers they currently employ. The second phase ramps up the application of the data by “ensuring that only qualified drivers are eligible to obtain and retain a CDL” according to the FMCSA.
The requirements of the second phase outlines that the SDLAs:
- Must search the clearinghouse before issuing, renewing, upgrading, or transferring CDLS and issuing, renewing, and upgrading CLPS.
- Must review a driver’s information when notified by the FMCSA of a driver’s clearinghouse status change.
- Will be required to take away the driver’s driving privileges who are in the “prohibited” status. The given CDL would then be downgraded until that driver completes the return to duty process, which would a negative test for drugs and alcohol.
Data pulled from September 2024 Clearinghouse shows that 178,839 CLP and CDL holders are in prohibited status currently. This is out of the total population of the Clearinghouse of 267,360 drivers that have at least one violation.
Of those drivers 136,224 have not started the return to duty process enabling them to get back on the road making up about 76% of the drivers currently in Prohibited.
Utilizing data from the BLS, that includes all sectors at 1,546,000 jobs, in October 2024 the current prohibited status drivers make up 8.8% of that total. It is a very rough estimate but gives us a better understanding of the level of impact that this situation could have moving forward regarding capacity currently and maintaining it in the future. Currently, drivers who still have a prohibited status CDL could be fined or be required to do other compliance related tasks before they have their driving privileges reinstated. This will have an impact on the driver population as a whole, but the timing of it remains to be seen.
What is the FMCSA?
The Federal Motor Carrier Safety Association (FMSCA) is the division of the Federal Department of Transportation whose main goal is to prevent commercial motor vehicle-related fatalities and injuries by enforcing safety regulations
What is the Drug and Alcohol Clearinghouse?
The Clearinghouse is an online database, established by an act of Congress in 2016, that contains information about violations of the U.S. Department of Transportation Controlled Substances and Alcohol Testing Programs for Commercial Driver’s License (CDL) and Commercial Learner’s Permit (CLP) holders.
It gives employers, state driver licensing agencies, and law enforcement officials the ability to search for individuals who have committed a drug or alcohol program violation. In addition, substance abuse professionals and medical review officers are required to report violations to the Clearinghouse as they occur. Ultimately this allows a centralized location to eliminate the lapse in communication for those who violate policy while working for one employer but fail to report it to their new employer for example. If an employee violates a given policy, then their CDL or CLP Status is downgraded to “prohibited” which takes away their driving privileges.
Immigration and Visas
The incoming Presidential Administration has made mass deportation of people who are not in the country legally a major piece of their platform. It is a fact that people who are not in this country legally do operate commercial motor vehicles and we have no way of knowing the exact number. This means it would be difficult to accurately predict the impact deportation effort may have. Given the rhetoric of the administration, we believe that can expect stricter overall immigration policies, possibly including work-visa policies as well. This is relevant as many drivers that are here legally may have work-visas, but doesn’t grant them full US Citizenship.
It is estimated that in the United States the current breakdown of immigrant drivers ranges from 15-20% dependent upon the source. Although none of the sources are able to specify if they are permanent citizens or here on temporary work visas. While most of the attention has been on the southern border, stricter immigration and revised Work-Visa policies could have an impact on drivers from other countries as well. Here you can see a breakdown of the countries of origin for foreign-born truck drivers in the years 2010-2012 from the U.S. Census Bureau.
Potential policy shifts could reduce the legal driver pool and impact capacity over time. However, we can only speculate on what may happen regarding drivers that are not here legally and those here with Visa until we hear more details from the administration regarding the timing of any policy.
Demand
Freight demand remains stable, with short-term growth possible from tariffs and seasonal imports.
Disclaimer: The timing, details, and effect of policy impact remains uncertain and only speculative at this point in time.
Tariffs and Companies Planning
During the campaign, the incoming administration touted tariffs as a core piece of their economic policy. In theory, these included tariffs of at least a 60% Chinese goods and at least a 10% on imports from all other countries. While the impact of these proposed policies can only be speculated on, firms in various industries such as Steve Madden in Footwear and Black and Decker in Toolmaking, have already been planning ahead. During an October 29th Earnings Call, Black and Decker CEO Donald Allan says that once the tariffs are “more concrete” the company will focus on getting those price changes into the market in a reasonable amount of time. Those firms who have a heavy presence in China are already acting regardless. Footwear Maker Steve Madden is going to cut almost half of its production in China in anticipation of tariffs according to the New York Times. However, more than 70% of the Steve Madden’s U.S. imports still come from China.
Strategy
Frontloading or shipping goods before the tariffs start is the action that many companies are taking in the short term to avoid the reprecussions as long as possible. We have seen importers frontload already this year in anticipation of the East Coast Port Strike which only ended up lasting a few days in October. To gain perspective on what kind of Import Volume that this strategy can produce, here are some notable figures on imports during that span of time:
- The second busiest September in terms of TEUs volume ever was recorded at the Port of New York and New Jersey, totaling 779,3878 TEUs.
- For the entire United States total September imports of goods were equal to $283.0 billion which was the highest since March 2022 at $289.2 billion.
- In October, the Port of Long Beach, CA achieved its highest monthly volume ever in the 113-year history of the port, close to 1 million containers.
Companies are now likely to stock up in the same way again before any tariffs are announced to beat the price increases. Ironically though, this practice does increase rates paid for containers.
How much will container rates go up? We can look to the past to gain perspective. The Ocean Market is a little beyond our focus but it is worth taking a look at. The two charts below produced by CNBC from the Freightos Baltic Index, the only index that track container rates daily on major ocean shipping lanes, give examples of previous tariffs from Trump during his first term and Biden’s tariff from this year. In both cases below, once the tariffs were announced, aside from seasonality you can see rates start to trend upward well before the tariffs were put into place.
Currently it could a little bit of a double whammy for volume and rates, when you combine the tariff-dodging frontloading and the fact that the Port Strike on the East Coast is not 100% settled. Importers may view the January 20th deadline for the East Coast Ports negotiations as a deadline to import by as well.
Rates
This presented by Ken Adamo DAT Chief of Analytics on a recent webinar, shows the Year over Year % change in Spot Rates (Orange Line) and Contract Rates (Blue Line). There are no financials listed
What does this mean? Looking at any point in time on the line graph and matching it up to the vertical Y-Axis will show you how much the rate has changed when compared to that point in time last year.
Current Trend
Both Spot and Contract rates have shown upward momentum, with spot rates leading this growth:
- Spot rates have been year-over-year positive for four consecutive months, increasing by 5.16% YoY as of October 2024.
- Contract rates, while currently 0.49% lower YoY, are expected to follow the upward trend of spot rates within 3-4 months.
Cycle Phase
The truckload market appears to be transitioning from the trough phase to the expansion phase of the freight cycle: Spot rates exceeding contract rates suggest upward market movement. Historical freight cycles (2013-2017, 2017-2020, 2020-2024) confirm this pattern, with the current trend mirroring past recovery phases.
Spot-Contract Dynamics
Spot rates often serve as a leading indicator for contract rates due to their real-time responsiveness to market conditions. The widening gap between spot and contract rates implies increased pricing power for carriers, indicating higher costs for shippers in the near term.
Influencing Factors
The upward trend aligns with broader economic recovery, regulatory impacts (e.g., Clearinghouse driver restrictions), and strong seasonal demand. Additional pressures, such as potential tariffs and high import volumes, could amplify rate increases.
Strategy Adjustments
Shippers may need to prepare for higher rates by adjusting budgets and exploring efficiency improvements. Adamo explains “By looking at the spot rates you get a feel of how contract rates may trend in the next 3 to 4 months, sometimes it is longer sometimes it is shorter. When you’re pricing contract freight it is a forward looking perspective on where you think the markets going to go. This is true regardless of what type of organization that you are a part of.”
Long-Term Considerations
If DAT analysis holds true, the expansion phase could sustain into 2025, driven by increasing freight demand, capacity constraints, and regulatory tightening. Monitoring the spot-to-contract lag can help market participants refine pricing strategies and mitigate risks during this volatile cycle.
We have slowly been coming out of the trough. Moreover, with DAT’s Analytics of looking at how Spot Rates Change Year over year. We can see that spot rates have been increasing at a positive rate. Spot rates and contract rates have left the trough phase of the business cycle and will continue to trend upward if their analysis holds true and we are in the midst of entering the next phase of the cycle. In other words, the prices that the spot market is dictating are higher than at this time last year and both the spot rates and contract rates have been trending upward slowly.
*Research and analysis by David Decovnick.
BLS Jobs Report / Chart
Clearinghouse
https://landline.media/thousands-of-commercial-drivers-could-have-their-cdl-or-clp-revoked-under-new-rule/
https://www.fmcsa.dot.gov/regulations/drug-alcohol-testing/what-drug-and-alcohol-clearinghouse-clearinghouse-and-what
https://clearinghouse.fmcsa.dot.gov/about
https://www.fmcsa.dot.gov/newsroom/fmcsa-establishes-national-drug-and-alcohol-testing-clearinghouse-commercial-truck-and-bus
https://www.fmcsa.dot.gov/mission/about-us
Immigration / Visas
https://www.ttnews.com/articles/immigrant-truck-drivers
https://www.marketplace.org/2023/03/06/immigrants-help-fill-gaps-in-trucking-workforce/
https://www.ttnews.com/articles/eb-3-visa-driver-shortage
https://www.thetrucker.com/trucking-news/the-nation/trucker-arrested-in-fatal-colorado-crash-was-deported-16-times-before-accident
Demand / Imports
https://www.ajot.com/news/total-volume-surges-with-second-busiest-september-ever-at-port-of-ny-and-nj
https://www.ajot.com/news/port-of-long-beach-reaches-all-time-record-in-october
https://www.ajot.com/news/us-goods-trade-deficit-surges-to-2-1-2-year-high-on-jump-in-imports
https://www.cnbc.com/2024/09/11/trump-trade-policies-will-fuel-freight-rates-consumers-pay-price.html
https://www.supplychaindive.com/news/donald-trump-tariffs-prepare-manufacturers-supply-chains-china/732732/ https://www.supplychainbrain.com/articles/40635-huge-impacts-on-supply-chains-likely-during-next-trump-presidency
Rates
https://www.dat.com/company/news-events/news-releases/dat-september-firmly-into-a-new-truckload-freight-cycle
https://www.logisticsmgmt.com/article/dats_truckload_volume_index_shows_evidence_of_an_entrance_into_a_new_truckload_freight_cycle
https://www.youtube.com/watch?v=GEec_I2_xMk&list=PLc6hnVVpKQTkR61xAwPRl6yob6AQYlLU4&index=1&t=1587s
