Trucking’s Long Slump Gives Way to a Painful, But Promising Recovery
The trucking industry’s long downturn is finally easing after a years-long freight recession, but the recovery is being driven by decreased availability of capacity rather than increased freight.
Fleets and drivers are leaving the industry, and new truck purchases are running below replacement levels, gradually tightening capacity in what American Trucking Associations Chief Economist and Senior Vice President Bob Costello called a “supply-side cycle.”
“I’m going to let you decide if the glass is half full or half empty. I’m going to go with it being half full,” Costello said while speaking during NATSO Connect 2026 in late February.
On the demand side, the picture remains mixed.
Costello’s NATSO Connect keynote was generously sponsored by Federated Insurance.
A Softer Economy, But No Recession
The broader U.S. economy is still expanding, but modestly. After adjusting for inflation, real GDP growth remains close to the long-term trend. “Fourth quarter of the year was a little soft at 1.4%, but I think the first couple of quarters of this year are going to be over 2%, which is the long-run rate of our economy,” Costello said, adding he does not expect a recession.
However, most of that growth is coming from services, which do not generate freight. “We’re not putting services in trailers. We’re putting goods in trailers. So, we really need to focus on the goods economy,” he said.
Tariffs are also taking their toll on freight and trucking. “Tariffs are essentially a tax,” Costello said. “You don’t generally tariff services. What do you tariff? Goods.”
Real retail sales, adjusted for inflation, grew just 0.4% last year and turned negative year over year by December. Housing construction, another major source of freight, contracted about 7% last year, with only modest improvement expected in 2026. “Mortgage rates went from 3% to 7%, and it killed the housing market,” Costello said, noting that rates have dropped to around 6%. “It’s helpful, but it’s not saving the day.”
Non-residential construction remains elevated, particularly in warehouses, but that segment is cooling. One area seeing rapid growth, however, is data centers.
The U.S. is the second-largest manufacturing economy in the world, behind China. While manufacturing is freight-rich, about half of the inputs to those factories are imported. Costello said that when tariffs started, manufacturing decreased. Despite a recent surge in the manufacturing index in January, he remains cautious. “I am withholding judgment on that,” he said. “I want to see the next couple of months before I say, ‘Okay, manufacturing is back.’”
Fewer Carriers, Fewer Trucks, Fewer Drivers
The challenge for the trucking industry is that freight rates have been declining as costs have risen, a combination Costello likened to economic stagflation. After the pandemic-era freight boom ended, truckload contract rates fell sharply as demand normalized. At the same time, carrier operating costs rose nearly 10% in both 2021 and 2022, followed by 6.6% in 2023 and 3.6% in 2024.
Costello described capacity as “a puzzle” made up of multiple pieces, including carriers, trucks and drivers, which are all pointing downward.
Federal Motor Carrier Safety Administration data shows the number of registered carriers has decreased, and publicly traded fleets have reduced both company tractors and leased independent contractors. Truck purchases have also slowed, with Class 8 tractor sales down 21.4% so far this year, running below fleet replacement levels.
Drivers are also leaving the industry. Department of Labor data show employee driver counts below both their 2022 peak and pre-pandemic 2019 levels. “The number of employee drivers is down from its recent highs. It is also below pre-pandemic levels in 2019,” Costello said.
Finding qualified drivers is an ongoing challenge, regardless of the broader labor market, and carriers are raising pay to attract and retain qualified drivers.
A Healthier Industry Ahead
Costello said he is cautiously optimistic, and all of the freight and economic factors show that a slow, grinding reset of the trucking industry is underway.
“While it is not fun while you’re going through it, the industry is getting healthier,” he explained. “Demand-based recoveries in our industry are easy. Supply recoveries are tougher. They take longer. It’s painful how long it is taking, but it is happening.”
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