For much of 2019, economists have warned about a potential recession that could be coming in 2020. Some of those projections have softened to more of a slowdown of growth, but the risk factors are still there. The U.S.economy has stayed strong through the first three quarters of 2019, even amid uncertainty caused through the trade war with China and the negotiation of the USMCA (the trade deal between the U.S., Canada, and Mexico which has still not been signed by the legislature). While this uncertainty has not had a major impact on large carriers whose business largely relies on contract freight, it may very well be the reason there has been a rash of bankruptcies among small carriers.
Uncertainty usually means that shippers are going to take less risks and play things closer to the vest. The result is less of a need for carriers to fill the gaps that make up the spot market, which is what many small carriers rely on to drive their revenue. At the same time these spot rates are tightening, we are seeing the realities of a labor force that is almost at full employment. Pay and Wage are increasing, which is great for truck drivers. The driver shortage has been a well-known issue for a while now and while the pay increase hasn’t solved the problem, but it is helping to alleviate the pain.
For the small carrier, however, this could not come at a worse time. They are now seeing their labor costs increase as well as their insurance costs, all at a time when their revenue is taking a hit. Those three factors are key contributors to why we have seen so many bankruptcies in the industry this year. As we look forward to next year, the risks of the recession are still present, so it will be as important as ever for everyone in the industry to continue to work on building the relationships that will help them weather the storm.
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