The freight recession is getting worse as the economy detoxes from the pandemic trucking boom

• July data from Motive showed a contraction for US carriers and a 15% year-over-year decline in retail demand.
• Unemployment for truck drivers could move higher as larger carriers, like Yellow, feel more pain. 
• The freight recession may also signal a "detox" from the artificial demand spikes and gross margins seen in the pandemic. 

Even as Wall Street pulls back on its predictions of a looming economic downturn, a worsening freight recession is pointing to a slowdown in a key sector of the economy. 

A new report from trucking and freight analytics firm Motive showed that trucking employment and retail demand fell in July, and an increasing number of big carriers are leaving the market — and researchers expect the sector to keep contracting. 

Trends earlier this year suggested that the freight recession was limited to smaller businesses that couldn't keep up with fuel and trucking costs, but the latest data show the pain is moving upmarket to larger firms, Motive said. 

"Early in the freight recession smaller carriers got hit hardest by changing retail diesel and freight spot market prices, but as the conditions have continued, the larger fleets are feeling the effects more significantly," Motive researchers wrote, pointing to this week's Yellow bankruptcy filing. The trucking giant shuttered after a century of business, and had about 30,000 employees. It filed for Chapter 11 on Sunday, just three years after the federal government supplied it with $700 million in loans to stay afloat during the pandemic. 

Retail demand for trucking, too, trended downward in July after a brief uptick early in the month. 

"The first two weeks of July (which included July 4th and Amazon's Prime Day) seem to have marked the peak of demand for 2023 given this downshift," Motive researchers said. "This further supports the idea that the freight recession will remain through the rest of 2023."

All this has coincided with falling employment for truck drivers, as well as declining employment opportunities, with fewer new jobs available for displaced drivers. New carrier starts were down 7% year-over-year in July, and year-to-date remain 29% lower, according to Motive data.

To be sure, much of the freight recession may actually point to a reversion to pre-pandemic trends after years of elevated demand for e-commerce. Data from the St. Louis Federal Reserve illustrate that the downturn in online retail sales has been brought back in line with 10-year averages from before COVID-19 struck. 

"While the downturn in consumer demand and the resulting freight recession have been challenging for many carriers, it may also represent a 'detox' from the artificial highs of consumer demand (and gross margins) during the pandemic," according to Motive. "Similar to mortgage interest rates now being at more historically common levels, it may be that trucking's lack of growth is less a catastrophe and more a reversion to normal levels."