'I don't know how long I can stay in business': Truckers' fears have soared to recession-level highs

David Duprey/AP Photo

Truckers are starting to feel recessionlike hits.

• Trucking companies' rate expectations have sunk to 2016 levels, according to a new Morgan Stanley report.
• The last time trucking hit a recession was in 2016.
• One truck driver told Business Insider his earnings were down by nearly half since last year.
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While the economy has mostly posted numbers that indicate health, truckers like Christopher Powell have seen their pay hit the skids.

Powell's gross earnings have tanked from $6,000 to $7,000 per week to $3,500 to $5,000 - and that's before he has to pay out for repairs, maintenance, and other business expenses. "I don't know how long I can stay in business if things don't pick up," Powell told Business Insider.

That negativity was reflected in a new Morgan Stanley freight note to investors. According to Morgan Stanley's regular freight survey, rate expectations are sinking into the negatives - "well below 2016 levels." That was the last time freight sank into a recession.

Read more: Truckers warn of a 'bloodbath' as trucking companies go bankrupt and slash profit expectations

Freight rates have dipped year over year for six months straight. Loads on the spot market, in which retailers and manufacturers buy trucking capacity as they need it, rather than through a contract, fell by 50.3% in June year over year.

But capacity, meaning the number of trucks available to move loads, was up by 29.9% in June year over year. A particularly profitable year for truckers was 2018, and it encouraged lots of companies to buy more trucks and hire more drivers. Companies ordered so many new trucks last year that, by January, there was still an eight-month-long backlog of new truck orders.

Now that business has shrunk again, companies are dealing with a glut of capacity. Industry insiders told Morgan Stanley in the survey that they expect some of this capacity to go away - which means more companies going bankrupt or scaling back business. "Even brokers and shippers are beginning to highlight the potential for capacity to exit in the coming months," the note said.

Unfortunately, that's typical in trucking - a highly cyclical industry. "One of the problems that we've had in the past, when things are hot, people will expect a year from now that it's going to be just as good," Don Ake, a vice president at the freight-equipment research group FTR, previously told Business Insider.

"We will build too many trucks, and then any pull back that you have in the economy causes this large down-cycle, and it's bad for everyone in the industry," Ake said. "The cycles are bad for the industry, but you can't control them. You can't tell people not to buy trucks and not to build trucks."

Do you work in trucking? Has your business been hit by the freight downturn? Email the reporter at rpremack@businessinsider.com.