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When will pay increase?
We get this question a lot, as do the leadership and dispatchers at trucking companies across the country.
The answer? No one definitively knows when truck driver pay is going to increase. We all have our best estimates, but that’s all they are: estimates.
What we can tell you is that it’ll get better and the market will come around again. The old cliche rings true: There's light at the end of the tunnel.
So what can you do in the meantime? How can you keep your pay stable through this difficult time to keep food on the table and the lights on at home?
Anderson Trucking Service (ATS) has been around for nearly seven decades. We’ve seen the highs and lows of the market in the 80s and again in the late 2000s. Unfortunately, the soft market we’re seeing right now isn’t totally new to us. It may differ from other soft markets, but we’ve worked through tough markets before. Fortunately for you, that means we can provide the assistance you need to succeed.
Before you can understand when your pay will go up (or if it can go lower), you have to understand the market and how it changes.
In this article, we’ll explain:
- Recessions and how long they typically last
- Market cycles and how they work
- What it’s like being a driver in a recession
- How trucking companies are protecting pay
What is a Recession?
The simple definition of a recession is “at least two consecutive quarters of declining gross domestic product” (GDP). These quarters follow a period of growth. Economists look at the economic output, consumer demand and employment. To be considered a recession, the period of declining GDP must last for several months or more and there should be an impact on income and employment (which generally affects economic activity).
Recessions aren’t caused by one single thing; they can result from any number of factors. For example, experts say the Great Depression was caused by seven key factors — the stock market crash of 1929, oversupply and low demand being among them. In other words, there was some sort of imbalance. Before the market can normalize, the imbalance needs to be addressed.
The Great Depression may have lasted a decade — the worst economic period we’ve faced in the U.S. — but the average length of a recession is typically not nearly as long. The average modern recession (post World War II) lasts ten months. If we go back to 1854, the average recession lasts 17 months.
Keep in mind, however, that once a recession ends, everything doesn’t go back to normal. The Great Recession (beginning in December 2007) lasted 18 months and its effects lasted for years. That means if we are, in fact, in a recession, or about to enter one, the effects will be lasting. We need to prepare for that.
Whether or not we’re in a recession right now is up for debate. The pandemic led to an imbalance in supply and demand, pushing the industry into a supply-rich period (more on that below). Combined with truck and parts shortages and global conflict, the transportation industry is definitely not in the best economic position.
However, at the time of this writing, the GDP is up, unemployment numbers are looking good and interest rates might hold and get consumers buying again. This makes it difficult to predict what will come in 2023.
Transportation Industry Market Cycles
Most businesses go through cycles in which their financial earnings are impacted by the economy. With the U.S. potentially heading into a recession, there’s no doubt a lot of businesses are being negatively affected right now.
Some businesses aren’t affected by market cycles. An example of this would be the healthcare industry. No matter what the economy looks like or what time of year it is, business is steady and finances aren’t interrupted.
Other industries are significantly impacted by changes in the economy. Transportation is one of those industries. The economy and time of year can play a role in the financial health of a company.
Some high and low points in the market are predictable due to seasonality. For instance, freight normally slows down in cold-weather states in the winter due to frost laws (seasonal weight restrictions) and less demand for freight in industries like agriculture.
Less unpredictable is the change in supply and demand. When supply and demand are out of whack, the trucking industry can feel an extreme shift. Thankfully, transportation experts know how to navigate highs and lows. It is cause for some adapting, however, and it’s not without its frustrations.
When these shifts occur, we see the cost of freight fluctuate and, therefore, what truck drivers take home fluctuates.
When we were in a peak cycle during the pandemic, we saw great freight rates and drivers were taking home more money than they’d ever seen. However, we entered a lower part of the cycle in 2022. Freight prices are down significantly and drivers are making less than they did during the pandemic.
The transportation industry cycles through two types of periods:
- Supply-rich periods
- Demand-rich periods
A supply-rich period occurs when the supply of trucks and drivers exceeds the demand for their transportation services.
A demand-rich period occurs when the demand for transportation services exceeds the number of trucks and drivers to haul the goods.
Generally speaking, the transportation cycles between these periods every 2-4 years.
As we enter the start of 2023, we’re in a supply-rich period. That means customers have the upper hand and have more control over rates. Until demand goes up and we swing in the other direction, rates will go down and continue to stay down.
Because there are so many factors that play into the market shifting, we’re not clear when that shift will occur and driver pay will increase.
Thankfully, we have some experience with supply-rich periods and have tactics to work through them.
What Does a Potential Recession Mean for Truck Driver Pay?
Arguably — according to experts — recessions are healthy and necessary before economic expansion can occur. That doesn’t mean it’s great to live and work through one, especially if you’re in an industry — like the trucking industry — that feels the effects of a slow cycle.
It’s difficult to be a truck driver right now, and many drivers — especially new drivers that haven’t seen this kind of market before — are frustrated.
Freight is less readily available, so unless drivers are running a ton of extra miles and staying out on the road for longer than normal, chances are they’re making less than they’re accustomed to. Their trucks may be older and cost more to maintain due to the truck/parts shortage. Fuel prices have been on the rise as well.
All of this makes it that much more challenging to succeed as a truck driver.
Related: If you want to understand how we got to this market, read this 2022 quarter 4 trucking industry forecast.
Thankfully, the floor for pay is much higher than it used to be due to increasing costs. Trucks are more expensive, maintenance is costlier, insurance prices have gone up and inflation has driven up the cost of living. While pay right now is still higher than it was pre-pandemic, being accustomed to out-of-this-world pay and then having it drop significantly is stressful, to say the least.
While we have likely reached the floor for pay (or come very close), it’s still a good idea to adopt some new strategies until the market turns around. That includes:
- Controlling your costs
- Adopting fuel-efficient practices
- Working with a stable carrier
- Expanding your freight hauling opportunities
Control Your Costs
Now is the time to save as much money as you can. Don’t spend your money extravagantly. In both your business and personal life, focus on purchasing only the things you need.
Save money where you can on the road by cooking in your truck, using fuel discounts and other discount cards and trip planning.
Adopt Fuel-Efficient Practices
With fuel prices on the rise and not appearing to drop anytime soon, conserve fuel where you can. Excess idle time will eat up your money, as will running extra miles because you failed to plan your trip and got lost.
Maintain a safe, steady speed to boost your miles per gallon (mpg) and avoid aggressive driving. Ensure your truck is running optimally; if issues go unnoticed or aren’t taken care of, they can significantly reduce your mpg.
Work With a Stable Carrier
Now is probably not the best time to jump carriers, but if your company is struggling to stay afloat right now, you may have no choice. Companies that weren’t paying well before we got into this cycle aren’t going to be paying any better. Top-paying companies are probably still paying well.
Related: The best companies to work for in the downturn market.
Companies that run only spot market freight can’t always provide the stability you need. Look for a company with a wide customer base so you always have access to a diverse array of freight.
Expand Your Freight Hauling Opportunities
Now is definitely not the time to be picky with your freight selections. If you want to earn a decent paycheck, you might have to take loads in areas you don’t love driving through. You may have to take a load that requires tarping.
You can also diversify your skillset by earning endorsements and getting your TWIC card.
Related: Here’s how to haul more freight in the downturn.
How Carriers Support Drivers in Slow Markets
You might be wondering what trucking companies are doing to protect you during this time. If companies do nothing about pay to support their drivers, drivers won’t tolerate it for long and will decide to leave. That’s why carriers are employing different strategies to help you on the road.
For starters, it’s important to remember that carriers aren’t lowering pay; freight rates are just down overall and so are miles. Pay rates remain steady; carriers will continue to maintain cents-per-mile (CPM) rates or percentage pay rates. However, if you do see CPM rates drop, it may be a sign that your company is going to start doing layoffs.
Other companies are implementing guaranteed pay to protect their drivers. Guaranteed provides some much-needed stability in an otherwise volatile market. For instance, if your guaranteed weekly pay is $1,450 and you only earn $1,000, your company will pay you the difference.
Some companies, on the other hand, are working hard to earn new contracts to provide you with steady freight opportunities. Before you start driving for a new company, ask them what they’ll do to support you in this market.
Moving into 2023: Work for a Stable Company
Whether we’re in a recession or will be in one in 2023 is still unclear. What is clear, however, is that we’re in a supply-rich period and we’ve likely reached the floor for pay; rates shouldn’t go much lower than they already are.
Thankfully, history tells us that the cycle will circle, go back up and normalize. We might not see freight rates rise to what they were during the pandemic, but rates will be steadier and freight will be more readily available.
In the meantime, you can prepare yourself by controlling your costs, adopting fuel-efficient practices, working with a stable carrier and expanding your freight-hauling opportunities.
ATS has been in business since 1955 and is a top-pay-certified carrier. We have a wide customer base which provides our drivers with freight stability even when the market gets tough.
We’re looking for lease and company drivers in the dry van and flatbed divisions. If you’d like to learn more about whether ATS is right for you, check out this honest review of ATS.