Looking back at 2021 and 2022 in retrospect, it really is amazing to see how dramatic of a time it actually was. There were extreme changes and transitions happening not only in transportation, but with nearly every industry in the world. Dissertations could be written in these two years, but I will do my best to keep it readable and focus on a few areas of importance.
Labor Shortages
The first area I will touch on that has an impact on nearly every industry in the world is labor. Labor shortages plagued the entire world in 2021 and to a slightly lesser extent 2022. There are a ton of drivers that led to this including the covid pandemic, increased demand, record government stimulus, and continuing demographic challenges. The covid pandemic really had a huge change on the world. Whatever your stance on anything that came with the pandemic, one thing I believe everyone can agree on is that it ushered in change. Good, bad, or indifferent, our world went through many changes. In the early days of 2021, many people lost their jobs due to the impact and government responses to the pandemic. Many of those people haven’t returned to work. On top of that, many people tragically lost their lives as well, further reducing the labor pool. Any way you look at it, the pandemic had an extremely negative impact on our available labor pool.
Record Government Stimulus & Increased Demand
The next two points mentioned in regards to labor really go hand in hand, record government stimulus and increased demand. Everyone got “free” money during the pandemic. It was great that people who really needed help during this challenging time received help, but it wasn’t limited to just them. People with jobs and stability got stimulus checks, businesses got stimulus checks, and many people and businesses got a second round of financial help. Regardless of who needed it and who didn’t, Americans had a lot of extra money they wouldn’t have had without government help. When you have more money, you buy more than if you had less money.
That’s exactly what happened.
Demand for goods and services began it’s rise already in late 2020, but 2021 was the year where it really exploded. People were buying more and more and many industries just weren’t able to fulfill demand as they were rebuilding from the pandemic. Even if they were able to build enough widgets to fulfill demand, getting them to market was another hurdle that companies now had to contend with. Trucking capacity took a big hit in 2020. The pandemic put a number of trucking companies out of business.
Everyone remembers the challenges of getting anything delivered in 2021, right?
A lot of that had to do with our transportation infrastructure. Scarcity creates an increase in price. That’s what happened with shipping. Prices went through the roof and stayed there through all of 2021. The transportation industry was extremely slow to respond because of how hard it was to get more equipment on the road. Truck and trailer manufacturing had the same issues as other industries. Material shortages, shipping delays, labor shortages, and delays in transporting finished products. So, it took a looooong time for shipping delays to get caught up, which kept prices for everything higher than if our supply chains were running smoothly. So, in summary, less people working and getting more money, led to demand levels that couldn’t be fulfilled.
Demographic Challenges as a Concern
Demographic challenges are of concern for many industries and transportation is close to the top of that list. The United States has an aging population. People are not having as many children as they used to and people are living longer than they used to. This leads to a higher population that needs to be supplied with less people to do it. Many industries have been able to offset some of these challenges with increases in productivity, but with transportation, there’s only so much more productivity you can get from one driver. The lack of scalable productivity with the fact that fewer and fewer people see being a truck driver as a potential career option. There is simply no good information on the horizon for the transportation industry when it comes to demographics.
2022 was a nearly complete reversal from 2021. Freight rates dropped considerably and remained there for much of 2022. Supply chains started to catch back up and demand dropped back to a more manageable level. The steady increase in interest rates starting in April helped create even more headwinds for demand. This coupled with a dramatic increase of trucks on the road led to the drop in freight rates that were realized throughout 2022. And that’s kind of where we stayed. 2022, from our perspective was a much more stable year than the previous 2! While it wasn’t a gangbuster year for growth, it was a welcome change to the chaos of 2020 and 2021. I really feel like we are at a crossroads, economically speaking, coming into 2023. A crossroads for the entire world, really. Which, is a subject I will delve into for the 1st quarter 2023 review!