Al Root

If you're looking for a canary in the economic coal mine, check the freight business.

Trucks, trains, and ships that transport goods from around the world to the U.S. are the economy's circulatory system. Problems are emerging: Business activity is slowing down as trade between the U.S. and China stalls, putting millions of jobs at risk.

Truckers Knight-Swift Transportation and Old Dominion Freight Line both reported first-quarter numbers this week. Knight-Swift stopped offering sales guidance for the next two quarters at a time, opting instead for one quarter, and won't go back "until enough clarity develops." For its part, Old Dominion said April was off to a soft start, with revenue a day in the month down 7% year over year so far.

Following earnings, Wall Street analysts cut their price targets on Old Dominion stock, bringing the average target down by $9 a share to $168. Knight-Swift's average price target came down $4 to $50 a share.

Union Pacific, a railroad company, also reported earnings. Analysts, worried that volumes will fall off in the second half of 2025, slashed their price targets, with the average falling by $6 to $256. Barclays cited deteriorating trans-Pacific trade for its cut.

Deteriorating might be an understatement. "Trade between China and the U.S. [is] collapsing," wrote Apollo Global Management Chief Economist Torsten Slok on Friday. Container ships leaving China for the U.S. are down some 50% over the past few weeks, according to data from Apollo. Similar data from Bloomberg also shows a sharp downturn.

Slok has some dire warnings. "The consequence will be empty shelves in US stores in a few weeks and COVID-like shortages for consumers and for firms using Chinese products as intermediate goods," he said. Inflation will pick up as well.

"In May, we will begin to see significant layoffs in trucking, logistics, and retail -- particularly in small businesses such as your independent toy store, your independent hardware store, and your independent men's clothing store," added Slok.

The Bureau of Labor Statistics counts about 1.5 million workers in truck transportation, 1.8 million in warehousing, and more than 15 million in retail. There are about 171 million jobs in the U.S.

Investors are starting to look nervous. Through early trading Friday, Knight-Swift, Old Dominion, and Union Pacific shares were down an average of 8% over the past month, about three percentage points worse than the S&P 500.

Union Pacific's "management noted the next three quarters will likely be a bumpy ride," wrote Benchmark analyst Nathan Martin on Friday. He maintained his Buy rating on shares following earnings.

Martin hopes the bumps will smooth out down the road. Investors should keep an eye on logistics results to feel certain it's happening.

Write to Al Root at allen.root@dowjones.com

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April 25, 2025 12:11 ET (16:11 GMT)

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