How industry leaders are analyzing overcapacity data

Trucking business exits from the market continue to catch up with a pandemic-induced influx of entrances, but carriers are still yearning for better days.

Since July 2020, the trucking industry saw a bonanza of firms flood the market to land lucrative rates. Amid that surge, a whiplash with high levels of revocations has helped balance the market, and recent months showed further promise.

"It feels like the exodus of capacity maybe has worked its way out of the market. And then we're starting to see that return to more normal levels,” DAT Principal Analyst Dean Croke told Trucking Dive in a February interview. He pointed to revocations slowing in January 2024 year-over-year.

Despite these elevated changes, departures from the market have yet to completely rightsize back to pre-pandemic normals.

Leading figures in the industry have been closely monitoring how these entrances and exits interact, and major carriers have repeatedly discussed the matter on earnings calls. 

But while weekly, monthly and quarterly snapshots highlight this surge and exodus in the trucking market’s capacity, they don't show the whole picture, industry leaders say. A Trucking Dive analysis further shows what the changes could mean and suggests the size of the industry may be starting to turn.

The prevailing narrative: Smaller firms' resiliency puzzles expectations

Trucking leaders have expressed both frustration and surprise with how slowly the market has corrected. During previous quarters as demand dragged, C-suite executives questioned how much longer the market's oversupply could last.

"We've all been talking about the stubborn exit of capacity," Schneider National President and CEO Mark Rourke said on a Q4 earnings call on Feb. 1, adding that executives "expected maybe a bigger exit at a faster rate."

Other carriers have also remarked on smaller trucking firms' ability to persist. Werner Enterprises CEO Derek Leathers has pointed to peak rates in 2022, federal stimulus and lower fuel costs as factors that helped buoy such resiliency.

Additionally, Werner Enterprises has repeatedly noted how a weekly exodus has stretched for over a year. Werner President and Chief Legal Officer Nathan Meisgeier talked about the matter during a Citi investor conference in February, noting how there’s been a weekly exodus for 72 straight weeks.

However, during a Q1 call in early February, the carrier also noted a recent trend of new activations falling drastically.

Rethinking what these snapshots say

The dataset isn't perfect. Former Knight-Swift CEO and President David Jackson said on an earnings call in January that monthly snapshots can be particularly troublesome because of volatility. He noted spikes in revocations can occur at the end of the month because of some carriers’ inability to find insurance.

Jackson also said a monthly change might not show observations that a company is seeing more broadly over time. “Not all data is created equal,” he said.

Similarly, the Federal Motor Safety Carrier Administration notes in its data that a business can have multiple operating authorities, and analysts have further noted how the size of a fleet isn’t necessarily captured.

Current comparisons aren’t the only measure to consider. Even when a monthly snapshot turns from a net exodus to a net addition, it’s only one slice of a long-term trend.

Different lenses provide more insight on capacity changes

Another approach is to examine the rates of change that are happening with grants and revocations, or how much overall capacity the industry has added or lost.

For example, by looking at cumulative totals, excluding reinstatements, the data show that revocations have actually overtaken grants in 2024, a trend that's continued to hold.

"I would argue that unless you are looking at cumulative changes, you would be misinterpreting the data," Avery Vise, VP of Trucking at FTR, said in an email. "For example, aside from February, recent net decreases are the highest on record. But if you don’t consider the extraordinary period of new entry between mid-2020 and mid-2022, then you are ignoring the scope of the capacity increase."

But one must consider what is also happening with payroll employment, Vise noted.

Michigan State University’s Jason Miller did just that, noting payroll data helps show a "slow, steady trickle" of rebalancing. The supply chain professor and interim chair of his department noted his findings in a LinkedIn post in mid-March and said that those government stats are also more reliable in assessing capacity.

Demand is not yet there, industry leaders say

While revocation data may suggest momentum for fleets eager to have the market turn in their favor, analysts warn that demand has yet to recover.

DAT’s Croke has noted that capacity leaving the industry has never turned the market cycle. “It’s always the demand side,” he said.

When looking at other capacity metrics such as seasonally adjusted trucking payroll data and other employment figures, Miller said in an email that supply hasn’t declined that much in general.

Miller noted Feb. 23 that a spot market cycle indicator is solidly in bear market territory in terms of pricing, and there hasn’t been a notable drop in adjusted for-hiring trucking ton-miles, suggesting “evidence of substantial excess capacity remaining in the market.”

“We aren’t yet seeing an uptick in demand for trucking,” he wrote.

Werner's Meisgeier noted a similar sentiment at the Citi conference, saying: “It does feel like we still need a little last push to get to the true balance on the supply and demand side of the equation.”