Freight Market Update: 5 Signals Capacity Is Tight

Summary View Transcript Freight market update: 5 pillars explaining why capacity is tight and rates are holding up. Backed by SONAR data and Q2 carrier earnings, this breaks down tender rejections, spot rates, steady demand, dedicated capacity shifts and why driver recruiting is getting tougher. If you want the real takeaway fast: this looks more supply-driven than demand-driven. Public carriers are saying it, and the data lines up. #FreightMarket #SONAR #TruckloadRates The national Truckload Rejection Index stands at 14.36% — well above its six-month average of 10.9% — and has held elevated for months rather than spiking and retreating, according to FreightWaves SONAR data presented in a recent market update. Flatbed rejections are running at 23.5% and refrigerated at 19.46%, both outpacing the national average. The sustained nature of those levels, rather than any single week’s reading, is the clearest sign that capacity is not self-correcting quickly. The analysis identifies five interlocking pillars driving the tightness: capacity is leaving the market, spot rates are strong and durable, demand is steady but not surging, shippers are pivoting toward asset-based and dedicated capacity, and driver recruiting is becoming materially harder. Each pillar showed up in Q2 earnings calls from major public carriers, including Knight-Swift, Werner, and J.B. Hunt, lending independent corroboration to the SONAR data. On capacity, Knight-Swift management attributed rapid tightening to supply-driven dynamics, with spot rates exceeding normal seasonality and tender rejections reaching levels the carrier had not seen since 2021. Both Knight-Swift and Werner specifically called out FMCSA and DOT efforts to revoke invalid CDLs and shut down noncompliant driving schools as forces removing low-cost, noncompliant capacity from the market. Werner also flagged ELD providers exiting alongside the school and driver removals. “Rates can rise even when diesel is falling, and we see that in the data.” On rates, FreightWaves’ National Truckload Index showed a modest dip in mid-June before resuming its climb. Stripping out fuel costs — the key durability test — spot rates continue to move higher independent of diesel prices, indicating that willingness to pay and lack of capacity, not fuel, are the primary drivers. Knight-Swift’s CEO characterized the current cycle as supply-driven rather than demand-driven, a view consistent with volume indexes in SONAR remaining relatively flat to modest rather than surging. Where volume is rising is in intermodal . J.B. Hunt reported higher intermodal volume attributed to rising fuel costs and constrained truck supply pushing freight toward rail — a mode shift, not a broad demand increase. On the dedicated side, J.B. Hunt said its dedicated pipeline was at record levels, citing a tight driver market, regulatory pressures, and customer demand for reliable capacity. Werner CEO Derek Leathers noted on his company’s earnings call that organic dedicated business is growing as a whole, not solely from fleet acquisitions. The driver recruiting picture is worsening across the board. J.B. Hunt flagged increased sign-on bonuses and targeted wage increases as a potential margin pressure point going forward. With the eligible driver pool shrinking under regulatory enforcement and a healthier freight market giving drivers more options to chase higher pay, carriers are absorbing recruiting costs that are unlikely to recede quickly. The convergence of all five signals, each confirmed by both SONAR data and the largest carriers’ own reporting, suggests the current tightness reflects structural shifts rather than a temporary seasonal pattern. National tender rejections are at 14.36%, well above the six-month average of 10.9%, with flatbed at 23.5% and refrigerated at 19.46%. Knight-Swift says tender rejections have reached levels not seen since 2021, driven by supply-side dynamics including FMCSA and DOT crackdowns on invalid CDLs and noncompliant driving schools. J.B. Hunt reports a record dedicated pipeline and rising sign-on bonuses as driver recruiting tightens, flagging increased labor costs as a potential margin pressure point. Speaker 1 [0:08] Okay, today’s Sonar Update, I really want to talk about 5 key pillars that I’m seeing happening in the market and then back those up with sonar data and some information from recent releases we’ve been tracking and we’ll continue to talk about on the show as well. So the 5 capacity— the, the 5 pillars are: 1, capacity is leaving the market. We’ve been talking about that at length length and that carrier exits continue with regulatory enforcement and the FMCSA and DOT revoking invalid CDLs as well as shutting down non-compliant CDL schools. The second pillar is rates are strong and durable. We’re continuing to see spot rates particularly remain elevated and contract rates continuing to rise. Demand is steady even though it hasn’t been increasing and is the third pillar