Davi Pedro in his neighborhood in Everett, Mass., on July 28. He recently sold his semi-truck due to the freight recession. Photo for The Washington Post by Cassandra Klos.

Davi Pedro could see it coming.

The freight boom that had drawn him into trucking was starting to ebb. After nearly three years of free spending, consumers had finally bought just about all the computers, televisions, furniture and clothes they could use. That meant fewer boxes, cartons and containers needed to be moved around the country – and less work for drivers like Pedro.

Suddenly, the lucrative round trips from his home outside Boston to Chicago or Milwaukee paid barely enough to cover his gas, tolls, insurance and repairs, leaving little profit to compensate him for the long days away from his family.

“The expenses are higher than what you’re making,” said Pedro. “It’s not worth my time.”

So this spring, Pedro, 42, found someone else to take over the monthly payments on his 2017 Freightliner, purchased in 2020 for $49,900. He quit hauling freight and took a job driving a dump truck for a local paving company.

Pedro is among several thousand drivers who have fled tractor cabs this year amid one of the harshest freight recessions in memory. As soon as Monday, Yellow Corp., the nation’s third-largest trucking company, is expected to file for bankruptcy in the industry’s largest failure to date, a development that would idle 30,000 workers.

The driver exodus represents a stark turnaround from 2021 when the White House mobilized to attract more men and women to haul road freight with paid apprenticeships and efforts to tap military veterans.

Since trucking was deregulated in 1980, the industry has cycled through regular boom-and-bust episodes every 18 to 24 months, according to Ken Adamo, chief of analytics for DAT Freight & Analytics in Akron. When times are good, new drivers flock to the business. The influx inevitably drives down rates, leading many of those new drivers to quit.

The covid chapter of this story was extreme. At its peak, roughly 8,000 trucking companies entered the market in a single month, compared with the long-term monthly average of about 700, Adamo said.

“There’s still more capacity than freight to be moved,” he added. “It’s a tough time to be a carrier.”

A printed photo of Davi Pedro in front of his semi-truck he recently sold. Davi Pedro /Handout via Washington Post

The freight slump is largely good news for consumers, who no longer must wait for goods they have ordered, and manufacturers that last year ran short of key materials such as semiconductors. Today, the nation’s supply chain is operating more smoothly than at any time since late 2008, according to an index maintained by the Federal Reserve Bank of New York.

During the pandemic, there were too many goods and not enough ships, trucks and planes available to move them. Now, as merchandise consumption slowly returns to normal, the U.S. supply chain has more capacity than it needs.

“The freight recession is real and it stretches across modes, across air, trucking and rail,” said Phil Levy, chief economist for Flexport, a San Francisco-based supply chain company.

Like so much else, the roots of today’s freight slump can be traced to the pandemic. As the coronavirus disrupted activity first in China and then in Europe and the United States, chronic delivery delays and shipping cost hikes caused companies to rethink their just-in-time strategies and instead build up stockpiles of consumer goods and industrial parts, Levy said.

When consumers later began resuming their normal spending patterns – with fewer goods and more in-person services – companies were caught with overstuffed warehouses. Higher interest rates made a bad situation worse by increasing the cost of keeping idle supplies.

Major retailers in recent months have been ordering fewer items, focusing instead on reducing their stockpile of unsold goods. At Target, inventory in the first months of this year plunged 16%, led by apparel and home goods.

Shipping containers arriving at the Port of Los Angeles, ground zero for the pandemic-era woes, are down 23 percent from a year ago. Truckers are getting less than half their 2021 per-mile peak earnings, adjusted for inflation, even as their operating costs rise. And on Wednesday, Union Pacific, the nation’s second-largest railroad, said its profits fell more than 11% in the most recent quarter.

“I don’t know that we’ve ever seen freight demand fall this far, so fast and for so long, without an accompanying economic recession,” David Jackson, chief executive officer of Knight-Swift Transportation Holdings, told investors this month.

Normally, a downturn in freight shipments would signal the approach of a broader downturn. But consumer spending, which accounts for 68 % of the economy, isn’t collapsing. It’s gradually slowing and pivoting from merchandise to services, such as insurance and air travel. In the second quarter, consumer spending on services rose three times as fast as goods purchases, according to the Commerce Department.

This distinctive economic climate is making the freight recession more punishing than usual.

Lower freight volumes that are soon followed by a full-blown recession are ordinarily cushioned by falling gas prices, from weak demand, lower equipment costs and a soft labor market with wages under control.

Yellow Corp. trucks are seen at a YRC Freight terminal on July 28, in Kansas City, Mo. After years of financial struggles, Yellow is reportedly preparing for bankruptcy and seeing customers leave in large numbers – heightening risk for future liquidation. Charlie Riedel/Associated Press

None of those conditions apply today. Retail gasoline prices average $3.56-per-gallon, according to the Fed. That’s down about 18% from one year ago, but still high relative to most of the last five years. Likewise, inflation has pushed equipment prices up and the strong jobs market means that employers must compete for workers by offering higher pay.

The combination of lower freight demand and higher costs is eroding profit margins and driving smaller carriers like Pedro out of the business.

In late 2020, when Pedro decided to launch his one-man trucking company, he had been making a living behind the wheel since emigrating to the United States from Brazil in 1999. He drove a limousine, before getting a job driving a car hauler in 2007.

As work-from-home consumers overwhelmed supply chains, Pedro saw there was money to be made. Hoping to make enough to pay some bills and to renovate his Everett, Mass., home, he decided to get in.

But he understood the boom-and-bust nature of the trucking business, which anyone can join by buying a truck and anyone can leave by parking it.

“I knew it goes up and down, up and down,” he said.

He got a fixed-rate loan and bought a used Freightliner Cascadia 125 with 350,000 miles on it for $49,900. That was a good deal at the time, before the pandemic freight surge drove prices for similar vehicles above $80,000.

As Americans trapped at home kept spending, Pedro saw his earnings grow. In the first year, he grossed $272,000, which left him with after-tax income of about $86,000, he said.

On the road, hauling loads for customers such as Amazon and JB Hunt, he was his own boss. After a long day of driving, Pedro would look for a Planet Fitness outlet and get in a workout. Later, parked for the night, he’d cook a 10 ounce steak in an air fryer tucked in his cab rather than eat the carb-laden fast food sold at truck stops.

He kept a close eye on his bottom line, carefully measuring the cost of individual trips against the pay that was offered. But repair bills for the Freightliner – including one for $7,200 – ate into his earnings.

“You don’t want to stay out as an owner-operator for a really long time. All you do is put money into the truck,” he said.

As the economy crept closer to its pre-pandemic habits, his regular trips from Boston to the Midwest paid less and less. Runs that once earned him $6,000 or $7,000 were now paying less than $4,000.

Fellow drivers felt the same pinch. Earlier this year, a friend turned over to the bank four brand new Volvo trucks rather than continue making the loan payments, he said. Through April, Pedro’s gross earnings were down more than one-third and the outlook was grim.

“It just went down a hill at the beginning of this year,” Pedro said. “Next year is going to be worse. So I’m gonna get out now.”

Major freight carriers also are feeling the pain. Trucking giant Knight-Swift’s profits fell by 71% in the second quarter while Yellow is expected to file for bankruptcy protection within days, amid a pension plan dispute with the Teamsters union that has sent customers fleeing. The company received a controversial $700 million government loan in the early days of the pandemic, which a congressional oversight commission later assailed as unjustified.

Hardest hit by the freight slump are the new entrants who were lured to the business by the pay-any-price pandemic environment. Between December 2020 and December 2022, nearly 100,000 new owner-operators began hauling road freight, according to the Federal Motor Carrier Safety Administration.

“Now we’re seeing the downside of that unbelievable run up,” said Todd Spencer, president of the Owner-Operator Independent Drivers Association. “It’s tough for these participants now that the tremendously increased volume is no longer there.”