Knight-Swift CEO Warns “Oversupply Problem” Will Hamper Rates Into 2020

Phoenix, AZ – Overcapacity is largely to blame for the challenging freight environment this year, according to the leader of America’s largest trucking company.

David Jackson, CEO of mega carrier, Knight-Swift, recently told CNBC the trucking industry is currently experiencing an “oversupply problem” that is going to continue to bring “near term pressure on freight rates.”

However, the market seems to be in a correction phase as evidenced by the latest employment figures from the U.S. Department of Labor (DOL) which indicate the for-hire trucking industry shed 4,200 jobs in September.

 

It was the third straight month employment in the trucking industry retracted.

In fact, for-hire trucking employment dropped by 300 jobs in July and another 5,100 jobs in August.

The employment reductions could soon help improve the operating environment for carriers, according to Jackson.

He said that since “capacity is leaving the space,” he expected freight rates to begin improving by the time the second quarter of 2020 rolls around.

“People in the industry and investors are looking for when that inflection point will come. General consensus is, that is happening the second quarter of next year.”

Until then, he warned investors that his company’s earnings would reflect the challenging environment.

 

“The freight environment is difficult. It has been more difficult than people expect from earnings standpoint,” he told CNBC.

Last week, Knight-Swift lowered earnings expectations for both the third and fourth quarters of 2019.

DRIVER SHORTAGE: Myth or Math?

Jackson’s comments come at a time when the American Trucking Associations (ATA) is once again warning of a worsening shortage of truck drivers.

For the third straight year, the so-called “truck driver shortage” topped the American Transportation Research Institute’s (ATRI) list of critical issues facing the industry.

Fierce debate continues about the existence of such a driver shortage.

Earlier this year, the ATA fired back at a Bureau of Labor Statistics (BLS) study that indicated the driver shortage is a myth.

Groups such as the Owner Operator Independent Drivers Association (OOIDA) have long held that the driver shortage narrative is a myth pushed by larger carriers unwilling to address the underlying problems related to driver recruiting and retention such as insufficient wages, poor working conditions, and unfair treatment.

 

The latest estimates on the shortage from ATA are over 60,000 drivers are needed, with a potential shortfall of over 100,000 drivers over the next five years.

To address this, the ATA says it supports newly re-introduced legislation called the Developing Responsible Individuals for a Vibrant Economy Act (DRIVE-Safe Act), which would effectively allow 18-year-olds to obtain a CDL and fully participate in interstate commerce.

 


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