Hunt Transport Services said Tuesday that the freight industry is in the "early innings of supply correction," however, it's the supply side that might limit the recovery's upside when demand ramps. Management noted growing labor pressures, pointing out that driver recruitment needs are at their highest level since 2022. However, the hardened driver market presents a demand tailwind for its less driver-intensive intermodal unit.
Authorities started clamping down on bad actors last year. The impacts of strict enforcement of English-language proficiency requirements and non-domiciled CDL restrictions were quickly amplified by crackdowns on ELD providers and driver schools. However, the exodus began before that.
Many drivers that ventured out under their own operating authorities left the industry after a prolonged period of poor economics. Higher fuel prices, which most small operators can't recoup through fuel surcharges, are the latest headwind for this segment of the market. The Supreme Court's ruling widening broker liability exposure has added another bottleneck for driver hiring.
It's also driving up insurance costs—an additional impediment to entry. These actions have certainly been a net positive for large carriers. The bottom layer of capacity, which is often reliant on cheap rates, is being removed.
Large fleets have reported significant improvements in equipment utilization and their contractual rate renewals are yielding low-double-digit increases. After several quarters of cutting truck counts to improve utilization, some public fleets are again looking to grow. But growth will be tested by a tighter driver market.
Hunt (NASDAQ: JBHT) has made significant additions to its driver recruiting teams in recent weeks, management said Tuesday at Deutsche Bank's Chicago Industrials Summit. While wages are moving up in certain regions, the company possesses some recruiting advantages. Management said the regulatory crackdown has drivers looking to latch on with financially stable carriers that have ample safety protocols in place.
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