Freight Volumes Down: What the July Jobs Report Means

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The July jobs report delivered a surprise: a decline of 23,000 non-farm payrolls, directly impacting the freight market. While unemployment dipped, it was largely due to people leaving the workforce, not finding new jobs. We break down how this, alongside declining Sonar Truckload Rejection and Volume Indexes, signals soft demand. However, contract rates are still rising, and manufacturing is accelerating. Dive into the complex interplay of these economic indicators and what they mean for capacity, pricing power, and the future of freight.

The U.S. economy shed 23,000 nonfarm payrolls in July, far below consensus expectations of 83,000 to 95,000 job gains, according to the Bureau of Labor Statistics report released Friday, Aug. 7. The miss was compounded by downward revisions to May and June that together showed 103,000 fewer jobs than originally reported. While the unemployment rate ticked down to 4.1%, the decline was driven by labor force participation falling to 61.4% — a five-year low — meaning workers left the workforce rather than found jobs.

For the freight market, the most relevant losses were in retail trade, down 19,000 jobs, and warehousing clubs and general merchandise, down 21,000. “Those are shippers generating truckload freight,” said the FreightWaves analyst presenting the SONAR update. Transportation and warehousing employment was flat — neither declining nor adding workers — mirroring what real-time SONAR data are showing on volumes and capacity.

The SONAR Truckload Rejection Index stood at 13.6% as of the update, down from a peak of 17.9% in early June. The SONAR Truckload Volume Index also retreated from its mid-July peak to roughly 11,258. The analyst cautioned against reading the rejection slide as a fundamental shift in market power, noting that the current cycle is driven by a lack of capacity, not weakening demand.

“I wouldn’t overread the rejection slide as a market flip to shippers by any means. The PPI still clearly says that carriers have the leverage. It’s just softened a bit off of that really high recent number from early June.” The SONAR Freight Pricing Power Index, ticker FWPI, came in at 72 for the week, down from a mid-July peak of 79 but still firmly in carrier-favorable territory. Contract rates continued to rise near their recent highs even as spot rates dipped slightly versus the 30-day average, narrowing the spot-to-contract spread. Rail volumes remained near the top of their five-year range, providing additional support for the carrier-favorable reading.

Manufacturing data offer a counterweight to the soft freight and labor numbers. The ISM Purchasing Managers Index hit 55.6 in July, its highest reading since May 2022 and the seventh consecutive month of expansion. New orders and backlogs both accelerated, and manufacturing added jobs for the first time in 33 months. The analyst said industrial activity should eventually pull freight demand higher, unless shippers are still burning through existing inventory rather than placing fresh orders.

Geopolitical risk adds further uncertainty. DOE diesel prices rose 16.8% month over month amid renewed conflict in the Middle East, raising questions about whether carriers can continue passing higher fuel costs through to all-in spot rates given the capacity environment. Regionally, capacity loosened most quickly in Atlanta and El Paso, while tender rejections remained elevated and actually increased over the prior few days across parts of the Midwest, with Green Bay standing out. The analyst summarized the setup as three economic forces — a weakening labor market, accelerating manufacturing, and stubborn inflation — pulling in different directions, with the Pricing Power Index sitting at their intersection.

• U.S. payrolls fell 23,000 in July, missing consensus forecasts of 83,000–95,000 gains, with prior months revised 103,000 jobs lower combined.

• SONAR’s Truckload Rejection Index slipped to 13.6% from a June peak of 17.9%, but the Freight Pricing Power Index remains at 72, firmly in carrier-favorable territory.

• ISM Manufacturing PMI reached 55.6 in July — highest since May 2022 — signaling potential freight demand acceleration even as current volumes soften.

Speaker 1 [0:07] For today’s Sonar Update, Friday, August 7th, I want to talk a little bit about the overall freight economy and, well, Sonar Freight data, and then the economy as a whole is a little bit of an economic update. There’s not a lot moving in the freight data week over week, so I wanted to zoom out a little bit and look at it a little bit more holistically. And when you do that, this is one of the more interesting weeks we’ve had all summer because freight, manufacturing, and the labor market are all telling us a little bit of a different story. So this is one of the reasons why having real-time data is so important so that you can really watch these things as they develop and rapidly change. The Bureau of Labor and Statistics released the July jobs report this morning showing a decline in 23,000 nonfarm payrolls. So that was a bit unexpected. The consensus was that we’d be adding between 83,000 and 95,000 jobs. And instead, it was reported that we were down 23,000. Unemployment did tick down to 4.1%, but it wasn’t driven by labor force increasing or by people finding jobs. It was driven by labor force participation falling to 61.4%, which is a 5-year low. So people are leaving the workforce rather than finding jobs. to bring that unemployment number down to 4.1%. Also, the May and June numbers were revised. And between those 2, when you combine those revisions, those prior 2 months are 103,000 jobs weaker than were first reported. The losses in jobs month over month were relatively concentrated in a couple of areas. Local government and education was down 50,000, but that’s mostly seasonal noise and really not that relevant to the freight market. However, retail trade As well as warehousing clubs and general merchandise were also both down 19,000 and 21,000 respectively. And the retail number matters because those are shippers generating truckload freight. Then to round it out, transportation warehousing employment was flat, not declining, not hiring either. So kind of what we’re seeing in our current sonar numbers. So let’s talk about that, what sonar is showing on the freight side. So our STRI, Sonar Truckload Rejection Index, is at 13.6%, which is down from that high peak in early June of 17.9%. So we have seen a little bit of a 3-week slide. But again, I feel like this is relatively seasonally normal. STVI, the Sonar Truckload Volume Index, is also declining alongside it. It’s down from mid-July peak. To about 11,258 currently. So it’s relatively normal for those numbers to move in tandem. And as we’ve said all along, this is not a demand-driven tight freight cycle. It is a lack of capacity freight cycle. So capacity did loosen a bit. But again, I feel relatively normal for July and August numbers. We just saw that really high peak early in June that brought the baseline up. Spot rates are down slightly versus the 30-day average, but contract rates continue to rise. They’re near their high. And as you can see in the spot-to-contract spread graphic, They are— that spread is getting smaller. So while spot rates have come down a bit over the last 3 weeks, contract rates are continuing to rise. So that is happening as new mini bids have come out and been put in place and new contracts are being put in place with contract rates rising. If we look at the country regionally, we are seeing capacity loosen in the Southeast, the Atlanta area, and in El Paso the most quickly. But we are also seeing some parts of the country remaining elevated. Green Bay stands out. So across the Midwest, tender rejections are remaining elevated and have actually gone up the past few days. So the bottom line is the The freight data and the jobs data are sort of pointing in the same di