Alleged Truck Driver Shortage
Flashback February 11, 2019: NPR says Facing A Critical Shortage Of Drivers, The Trucking Industry Is Changing.
Amusingly, such nonsense persisted even last month.
Flashback June 13, 2019: Will the Trucker Shortage Continue in 2019?
Will the shortage continue into 2019? All signs point to yes.
Transportation Bloodbath
With the above silliness out of the way, please consider Transportation ‘Bloodbath’ Unfolds
Truck drivers are suffering in 2019 — especially those who own or work at small businesses.
Rates in the spot market, in which retailers and manufacturers buy trucking capacity as they need it rather than through a contract, sank by about 18% year-over-year in June. That has caused truckers like Demetrius Wilburn, a Georgia-based driver, to find themselves unemployed.
Wilburn bought his semitruck four years ago after years of working as a company truck driver. But amid rock-bottom rates, Wilburn wasn’t able to make a payment one month — and his truck was repossessed.
Truckers’ Fears at Recession-Level Highs
Business Insider reports Truckers’ Fears Have Soared to Recession-Level Highs.
According to Morgan Stanley’s regular freight survey, rate expectations are sinking into the negatives — “well below 2016 levels.” That was the most recent time freight sank into recession.
Freight rates have dipped year-over-year for six months straight. Loads on the spot market, in which retailers and manufacturers buy trucking capacity as they need it, rather than through a contract, fell by 50.3% in June year-over-year.
Alleged Shortages
At the peak of every cycle there is always an alleged shortage.
Anyone recall the “shortage” of Florida condos and housing in 2007?
Reality Sets In
Hello. About that alleged truck driver shortage …
I never bought into the truck driver shortage thesis. In fact, I frequently stated millions of driver would lose their jobs due to automation. Today’s news is not even a down payment.
Also, please consider my post from earlier today: Recession Looms: Cass Freight Index Negative for 7th Month
Shortage of Common Sense
There is no shortage of trucks or truck drivers. But there is a shortage of common sense starting with the Fed.
- Make financing cheap enough and people buy trucks. Lower interest rates enough and people speculate in housing. Unfortunately, the Last Chance at a Good House Price Was 7 Years Ago.
- It’s not just the Fed. The ECB Perfected Corporate Zombification as negative-yield junk bonds take hold in Europe.
Deflation Coming
Repossession of trucks and inability to pay back loans is a major thing. Debt Deflation is Coming.
Finally, please don’t count your chickens on that alleged “longest expansion in history“.
The NBER is the official arbiter of recessions. It’s possible we are in one right now. If so we may not know for a year.
The point is moot as a month or two here or there is irrelevant.
This isn’t: When you blow bubbles, they eventually collapse.
Congratulations Due
Meanwhile, heading into recession, if not already in one: Congratulations Debt Slaves! You Owe the Banks a New Record Amount of Money.
Good luck with that.
Mike “Mish” Shedlock
Fewer truckers is consistent with decreasing train freight volume. When nothing is moved from point A to B, then it can’t be moved from point B to C.
“But there is a shortage of common sense starting with the Fed.”
Maybe it is an abundance of fear. After WW1, the 1921 recession saw the biggest quarterly GDP drop on record. In the 1930 recession, Hoover became the father of the New Deal, intervening in the natural correction of a roaring 20’s economy.
We have come full circle and the FED/government are trying to stave off another 1930’s meltdown. Thus, the housing bubble followed the .com stock bubble. The ZIRP bubble followed the housing bubble. Waiting in the wings is the MMT bubble.
If everything imploded, there would be serious civil unrest. Last time around resulted in the Tea Party and Occupy Wall Street.
What’s not closing or goin out of business?Now that would be a story!Sure trucking but the reality is everything not dependent on a govt check,govt handout,govt subsidy,govt contract is closing!
Obviously the U.S. is in a rapidly contracting economy and it is just beginning. Call it a deflationary cycle or a slowdown or a recession or whatever. The debt cycle is beginning to unwind and it won’t be pretty. A falling stock market can’t be far behind.
Whenever people complain of shortages and start clamoring that “something” needs to be done, it is absolutely axiomatic that they are not thinking: “It’s a free society: If you really want somebody (or something), offer a little more money (or similar incentives).”
A corollary to the axiom is that those who clamor that “something needs to be done” to combat rising health care, housing, and higher education costs do NOT understand that government intervention is the main cause of the price escalation!
Long time friend of mine says the truck tire factories are working in 3 shifts. Mid-West tire factory. Crops are historically late this year as well, could be a factor or not. Just doing some quick math. 2,500 truckers out of 3.5m, is about 7 bips. I guess if 2500 truckers a month are losing jobs, over a few years that is material.
Free Traders despise Trump’s “America First” tariffs, never missing the chance to overlook long term consequences for short term financial gain in trade deals. They and the hard left are desperately rooting for some sort of economic downturn because it’s their last hope of defeating Trump in the next election. So the news becomes a kind of Rorschach ink blot test for people with Trump Derangement Syndrome.
That Yahoo! News (really?) article looks a bit hokey, and the Business Insider link doesn’t work. In any case, I get no sense of a “bloodbath” being reported by DAT: https://www.dat.com/blog/category/rate-trend-of-the-week
Mish comes up with a thesis and then looks for data to support it.
This is not a source of anything except madness
A good-hearted rural bank President (who dealt w/ all kinds of loans) once implored on me that these truckers have some of the worst economics to live with. If times are good they can scrape by, on the down cycle, they can’t pay their bills and loans. It’s a total “we’re here to use you” type of job life.
As I heard ~ 25 yrs ago as a PM, in cyclicals EVERYONE MANAGES FOR THE UP CYCLES! No one knows crap about how the down cycles will play out – nor to plan for them. That’s why the (i.e.) chemical stocks are “rented – not owned”.
Leverage massively aggravate the problems caused by natural business cycles.
At the other end of the spectrum from chemicals, It’s why tech startups only really work well, when paying people in equity, rather than salaries. Once the startup grows big enough to take on debt, they’re pretty much toast as far as doing any more interesting work is concerned.
Demand for darned near any product is cyclical. Any cost which is fixed across cycles, makes it simply a matter of time, before you are caught on the wrong side of it. Exercise for the reader: Figure out the implications for societies specifically built to facilitate officially promoted rent seeking, and an ever wealthier and more influential class of pure rent seekers…..
Just wait until the Corporate debt bubble gets popped. This is just the beginning. I am stocked up on popcorn to watch the show
irrational exuberance might outlast your popcorn, I am afraid, especially with FED counterfeiting scoundrels acting ‘preemptively’…
Try less popcorn and more guns.
Stories like this are why people who allege “worker shortages” or willingly believe BLS numbers should be questioned. If we’re in such dire need of labor, why is the majority of the US population outside the labor force, even by BLS statistics? We’re not a nation of children and elderly people. Also, why aren’t wages rising in this supposed shortage?
The reality is that we’re living in a debt-fueled bubble with no endgame. Truckers, along with a lot of other groups, are in for a rough ride. Good thing everybody’s learning to code!