senior client partner, global industrial practice
This Week in Leadership
Work at the Office, Win a New Car!
The pros and cons of giving incentives to employees who are reluctant to return to the office.
The trucking industry has slammed on the brakes recently, and analysts are wondering if the rest of the US economy may slow down soon, too.
Truckers laid off more than 10,000 workers from July through September, according to U.S. Bureau of Labor Statistics data. The layoffs are a result of a sharp slowdown in manufacturing due to the ongoing US-China trade dispute. Tom Terragno, a senior client partner in Korn Ferry’s Global Industrial Markets practice, says that leaders across industries should view the trucking sector layoffs as a cause for concern. “They could be an early indication of an upcoming recession,” says Terragno.
To be sure, analysts have been voicing such concerns for some time, only to watch the economy motor along. But overall job growth has slowed in recent months across many sectors, with payroll additions averaging 161,000 per month so far this year compared to 223,000 last year. A recent Barclays report now puts the chances of a recession at 30% over the next 12 months. And more indicators are to come: Terragno says juxtaposing the trucking sector layoffs with some upcoming third-quarter earnings reports, “will provide leaders with a clearer picture of what growth looks like across all sectors.”
Trucking historically is known for both and hiring and firing many thousands of people at once. Last year was such a profitable year for the trucking industry that companies went on a buying and hiring spree, ordering loads of new trucks and bringing on scores of new drivers. The industry gained 36,800 jobs between June 2018 and June 2019. “Last year was unusually strong, with abnormally high freight rates, so there was going to be a correction at some point this year,” says Dustin Ogden, a Korn Ferry senior client partner and a member of the firm’s Global Logistics and Transportation Services Sector practice.
Ogden says the recent layoffs are also a reflection of an overall shift in the type of trucking services offered, pointing to the focus on same-day or next day delivery in ecommerce as an example. As a result, there are still areas of the industry that are hiring. In September, for instance, courier and messenger services companies bucked the layoff trend, adding 3,600 positions. Growth in ecommerce, which isn’t slowing down anytime soon, will continue to drive demand for drivers in certain segments of the industry.
“What we are seeing is a bifurcation of different organizational strategies playing out,” says Ogden. On the one side are the large national networks like FedEx and UPS that can provide dedicated capacity to large-sized customers to ensure there are no gaps in service. On the other side are small- and mid-sized local trucking companies that lack scale and are more exposed to the cyclical nature of the business. “The big are getting bigger, and the smaller general companies that don’t operate in a particular niche such as hazardous materials are struggling,” says Ogden.