It’s been hard for truckers to adjust to the new normal of 2022. With a likely recession coming in 2023 (many of us already feel like we’re in one), it’s essential to understand how it will impact your business and prepare. Even if a 2023 recession is not certain, our preparations can still help us increase business. So, let’s look at the likelihood of a recession and other business factors that may affect you in the coming year.
Will We See a Recession?
Jason Miller, associate professor of supply chain management at Michigan State University, is still hopeful that we’ll avoid an economic recession in 2023. “The strongest predictor of a true recession is how the labor market behaves,” Miller stated in a recent CCJ webinar. While inflation is up and we’re seeing other troubling indicators that point to a recession, we’re not seeing the drop in job openings that indicate a recession is hitting. Additionally, while inflation is still high, so is consumer spending (a drop also precedes a recession).
While Miller is hopeful, markets have started responding to the possibility of a recession. Bloomberg News reports that the Fed’s recent tightening indicates the government sees the economy moving toward a downturn. This market movement doesn’t just follow the Fed’s tightening. It also follows slowing corporate growth and gains. Coupled with investors moving back to bonds, a recession hedge, the markets have signaled where they think the economy is headed.
This market movement appears to match the predictions of ACT Research President and Senior Analyst Kenny Vieth recommended caution in the CCJ webinar. While he acknowledged the strengths that Miller sees, he doesn’t see them as a sign that we may avoid recession. Instead, he sees them as an indicator of the strength of the recession. If employment and spending stay high, Vieth believes we could see an exceptionally mild recession.
Driver Shortages in 2023
Driver shortages aren’t new. We say a shortage of over 80,000 in 2021, and we’re looking at about 78,000 for 2022. The improvement is good, thanks partly to companies like REY Logistics working to make it easier for new drivers to enter the market. However, with a large chunk of drivers set to leave the workforce over the next decade, we could still see a huge shortage, jumping up to over 80,000 in 2024 and then doubling from there over the remaining decade.
The good news is we may see the driver shortage ease in 2023, from this year’s 78,000 to about 64,000 next year. The bad news is that experts expect a large part of the demand drop to come because of a recession, not from new drivers entering the workforce. An impending recession will likely make it more difficult for fleets to add drivers. This certainly seems to be reflected in the sharp rise in the shortage experts predict for 2024 and beyond.
The Impact of a Recession and Driver Shortage on Your 2023 and Beyond
Trucking demand is high, and so are profits. The largest publicly traded carriers saw their net income rise 15% over the last two quarters. Unfortunately, those numbers are expected to see a steep decline next year. With a recession looming, however, that’s not unexpected. Once a recession hits and jobs and spending respond, we will see decreased demand, making it look like our driver shortage has eased slightly (as discussed above).
Fortunately, there is a silver lining. While the recession will hurt, the pandemic taught markets something that truckers have always known: the US economy doesn’t move if trucks don’t.
What does this mean for today’s fleets and owner-operators? In the short term, drivers will likely see contract rates decline in 2023 as we enter a recession and demand goes down. This may be impacted further by a likely reduction in new housing projects next year. The government is likely to increase infrastructure spending, which can help ease that, but only in specific areas and for fleets that work with infrastructure loads.
Moving Beyond 2023
Fleets and owner-operators looking to grow beyond 2023 will need to be ready to come out of recession. High demand and fewer drivers mean contract rates will likely rebound as we come out of recession. However, this means fleets must be positioned to meet the demand there. Meanwhile, diversifying during the downturn to take advantage of infrastructure-related loads will help owner-operators make the investments needed to be ready for a 2024/2025 economic revival.
Let REY Logistics Help You Prepare for the Future
At REY Logistics, we’ll keep you updated on news that impacts our business. Considering joining a team as an owner-operator? Reach out to REY Logistics to see how we can help you manage 2023 and prepare for the future.