Recession Warning: The Real Economy Is 'Very, Very, Very Weak' | Craig Fuller @FreightWaves ​

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**Craig Fuller** (1:00)
I can tell you unequivocally that the underlying economy is very, very, very weak. And it's interesting because the administration, Congress, the Federal Reserve, is in the state of denial because they have the stock market at near record highs. They have all this capital investment going in through data centers. And they're able to go out and tell people that the economy is great because they're effectively making up their own stats. And that's a very dangerous thing.

**Adam Taggart** (1:40)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. The freight industry has long been thought of as the circulatory system of the economy. It's how things bought and sold through commerce get from point A to point B in the real world. Now, historically, when trucking freight loads diminish, it's usually correlated with a slowing economy. And if it gets bad enough, a recession. Today's guest is Craig Fuller of Freightwaves, a price reporting agency focused on the global freight market and the leading provider of high-frequency data for the global supply chain. He recently released a prediction that the US freight trucking industry is about to experience, quote, the largest capacity purge in history. We'll ask him what that means for the economy, as well as for the hundreds of thousands of workers he expects to be impacted by it. Craig, thanks so much for joining us today.

**Craig Fuller** (2:31)
Great to be here.

**Adam Taggart** (2:32)
Hey, a real pleasure. So Craig, I have been reading your work for a long time over the years. It's great to finally get to interview you here in person. Welcome to Thoughtful Money. I think today's viewers are going to get a real treat out of this discussion. If we can, let's start with that report that you recently released. If you don't mind, I just want to read two paragraphs from it just to set the stage here. You said, quote, the freight industry is experiencing what experts describe as one of the most interesting times ever in freight, though unfortunately not in a positive way for most participants. Motor carriers and freight brokers across the spectrum are feeling significant pain from weak freight volumes and a rapidly changing operating climate. What we're witnessing appears to be the calm before a significant storm with indicators pointing towards what could become the largest capacity washout in trucking history. With the risk of the market eliminating 600,000 active drivers, the largest capacity purge in history may be coming bringing COVID-like spot rates. The difference this time is that there won't be a flood of immigrants created by Biden's open borders, which offered an endless supply of truck drivers. The capacity relief valve for shippers and brokers is forever shut, meaning carriers will have to pay up in terms of higher pay and bonuses for truck drivers. Capacity will also be much harder to find. Craig, reading this as a non-expert in the industry, to me, it sounds kind of stagflationary, where we'll have a lot less jobs in the industry, but shipping costs will be higher. Am I taking the right things away from this?

**Craig Fuller** (4:13)
It depends on, I mean, ultimately freight is a commodity. So if you're a producer, i.e. a trucking company, you want rates to go up. If you're a participant in the market, if you're buying capacity, if you're a shipper, if you're a manufacturer or retailer, then you want rates to go down.
And so it's important to anchor our conversation around how the industry thinks about. You have the natural longs, which are the trucking companies, which always want higher rates. And you have the natural shorts, which are the shippers that want the rates to go down. And then you have brokers and intermediaries that live in the sort of the middle of that. Think of them as the day traders. So as it relates to a macro economy, then the stagflation, I think stagflation is the right way to think of it, because ultimately you're going to have higher rates or higher prices for moving cargo at a time where you have pretty anemic volumes in the economy that is not reflecting an environment that should be tightening. And so I think it depends on which side of that argument you take. Certainly if you're a motor carer, you want higher rates, but you also recognize that you have to pay more for truck drivers and so forth.