Unprecedented Freight Recession Triggers Wave of Bankruptcies and Layoffs as Economic Indicators Signal Deepening Crisis

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In the midst of a severe recession in the freight market, marked by an oversupply of trucks and a scarcity of freight, the logistics industry faces a wave of bankruptcies, closures, and layoffs, with notable companies like Yellow Corp. and Convoy being casualties. This downturn, contrary to some analysts’ expectations, is not a mere reversion to the mean but a historical low in the freight market, requiring time to alleviate the excess capacity. Concurrently, economic indicators signal further challenges with rising rejection rates for new credit, a decline in the ability for emergency loans, and increased credit applications for mortgages, autos, and credit, reflecting the strain on consumers. Against this backdrop, a significant majority of Americans express dissatisfaction with the economy, with 75% describing it as “Poor” in a recent poll. The desire for pre-COVID prices reveals a sentiment that the current CPI drop and disinflation efforts fall short, with a yearning for deflation to 2019 levels. Adding to the economic woes, the macro outlook remains bleak, as demonstrated by alarming figures in the unsecured consumer ABS market, where expected losses significantly exceeded actual losses by 1.8 times. Furthermore, the Conference Board Leading Economic Index (LEI) registers a concerning trend, declining for the 19th consecutive month in October, a streak surpassed only during the 2008 and 1974 recession periods, painting a grim picture of the economic landscape.

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Layoffs and bankruptcies pile up in logistics amid shocking downturn: We’re seeing too many trucks for too little freight. “Some analysts and industry experts said the freight slowdown was a reversion to the mean. Unfortunately, it is not. We are in one of the worst downturns in freight market history, caused by a massive buildup of capacity, and it’s going to take time to burn it all off. Simply put, the freight market is experiencing a severe recession. . . . Since early in 2022, many companies have gone out of business or severely cut back by letting employees go. Some of those companies were household names in the industry, such as Yellow Corp. and Convoy. Many others were much smaller, not known perhaps beyond their headquarters location. Nonetheless, the bankruptcies, closures and layoffs have piled up, and the financial and human losses have taken a toll.”

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This may help explain why gas prices are down.

 


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