Introducing the Transfix Take Podcast
Listen in as Justin Maze, in-house market expert, shares bite-sized reports on what’s going on in freight. With the full report to follow:
Very Brief Respite for Shippers
Memorial Day weekend brought with it a traditional and expected increase in tender volumes, rejections and rates. Through the first week of June, capacity showed signs of weakening with less tender volume in the market, but with a highly elevated tender rejection rate, steady at ~25%.
“As capacity came back onto the road after the holiday, capacity was in shippers’ favor for two days,” says Justin Maze, Transfix’s senior manager of carrier account management. “Throughout the entire past week, we saw quite a bit of relief in the southern Florida markets, such as Miami, as peak season for the state started winding down.
“However, the opposite can be said for the rest of the southeast coastal region. Georgia continues to dominate, with capacity constraints spilling over to nearby states, including the Carolinas, Tennessee, Alabama and Mississippi. The major freight hubs in the South (Houston, Dallas) and the West (Southern California) are also tight, with no signs of loosening.”
With the end-of-month and the impacts of the holiday weekend over, we are seeing less freight fall into the spot market, which is giving shippers a short period of time to take advantage of looser capacity. The second week of June will continue on this trend primarily in the Northeast and Midwest. Going forward, volume in the spot market will increase, as we enter a peak freight season heavily driven by the beverage industry.
The market is driving down a road we have not seen before, with no signs of weakening. “This is not like 2018, when the heightened market was shortened by new capacity and equipment being brought into the industry rather quickly, leading to an oversupply,” Maze says.
Driver Shortage Taking its Toll
A lack of workers, not only in transportation but throughout many industries, continues to be a top-of-mind issue, and the longstanding driver shortage is taking its toll. Other industries with better work–life balance seem to be pulling potential drivers elsewhere. With increasing pay for truckers on the table, some drivers are moving among trucking companies in search of higher wages, and some are using the pay raises to cut their driving time, BusinessInsider.com reports.
Coverage of the driver shortage has become omnipresent across national news media, as shippers are paying more for transportation, and consequently, consumers are facing higher prices for most kinds of goods, including food and groceries.
As another ripple effect, Class 8 truck orders continue to decline, but this is not due to a decrease in the need for more capacity. Truck manufacturers are also fighting for employees, pushing arrival times for new trucks to almost 12 months from order.
May Manufacturing Marks a Full Year of Expansion
U.S. manufacturing is still expanding, despite record-long lead times and wide-scale shortages of basic materials, according to the Institute for Supply Management’s (ISM) Manufacturing ISM Report on Business. The ISM Purchasing Managers’ Index (PMI) rose half a percentage point to 61.2% in May, growing at a faster rate last month than in April. An index higher than 50% indicates growth, and the manufacturing sector has grown every month since April 2020.
“Record-long lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy,” says Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee. At the same time, he said, optimism among survey respondents increased, when compared with April.
“Panelists’ companies and their supply chains continue to struggle to respond to strong demand due to the difficulty in hiring and retaining direct labor. Record backlog, customer inventories and raw material lead times are being reported. The manufacturing recovery has transitioned from first addressing demand headwinds, to now overcoming labor obstacles across the entire value chain,” Fiore says.
With the uncertainty and volatility surrounding the U.S. economic recovery, shippers need a partner that can help them adapt and excel — no matter the circumstance. Shippers turn to Transfix for our leading technology and reliable carrier network. As volumes drive higher, we are here to help: Learn more about our Core Carrier program and Dynamic Lane Rates. As part of our ongoing market coverage, we’ll continue to provide breaking news, resources and insight into emerging trends and the pandemic’s impact on the transportation industry.