Tender rejections have climbed back above 14%, and Labor Day is already tightening the freight market. In this SONAR update, FreightWaves examines why rejection rates are rising faster than in each of the past three years, what that reveals about capacity, and why even modest demand moves can still disrupt this market. The analysis also covers tender volumes, dry van volatility, and what flatbed and refrigerated spot rates are signaling.

The national Tender Rejection Index has crossed back above 14% for the first time since early August, driven by the leading edge of Labor Day demand, according to FreightWaves SONAR data reviewed Thursday. The increase is outpacing the rejection rate rises recorded over each of the past three years during the same holiday window. The index tracks the share of contracted freight loads carriers decline when tendered by shippers, making it one of the most widely watched gauges of truckload capacity tightness: as available trucks shrink relative to freight offered, carriers grow more selective and rejection rates rise, typically pulling spot rates higher in turn.

The surge follows what many in the industry described as a stabilization period, during which rejection rates hovered around 13.5%. Zach Strickland cautioned carriers and brokers against interpreting that plateau as a sign the cycle is turning. “Stabilizing at a high level does not mean that this cycle is over,” Strickland said. “I certainly don’t think that the carriers out there and the brokers out there need to say, okay, we’re transitioning out of this.”

Strickland attributed much of the July and August demand softness to modal conversion rather than a fundamental weakening of freight volumes. Capacity, he noted, has not meaningfully expanded — it has simply stopped contracting at a faster pace than new capacity enters the market, a process he said took roughly six to seven months to play out. That dynamic follows an extended freight downturn in which sustained low rates pushed significant numbers of carriers out of the market, shrinking the supply base and leaving surviving capacity with more pricing leverage whenever freight demand firms.

“The fact that we are not seeing demand growth on this level, and yet rejection rates are jumping up higher, should tell you all you need to know about this supply-led cycle, very easily disrupted by any increases in demand,” Strickland said.

On the spot rate side, Strickland highlighted sharply divergent trends across modes. Flatbed rates remain elevated, supported in part by data center construction activity, but the overall flatbed trend line is drifting lower — a market Strickland described as possibly “a little bit overheated.” Refrigerated rates are holding steady, benefiting from seasonal produce demand and the absence of the intermodal competition that weighs on dry van. Van spot rates are the most volatile of the three, swinging up and down in patterns Strickland said have not been seen since COVID-era market conditions.

Tender volumes dipped heading into the holiday as shippers pulled orders forward before taking vacations, a typical pre-holiday pattern. Strickland expects volumes to spike sharply once shippers return after Labor Day. He added that hurricane risk — normally a significant freight disruptor at this time of year — appears muted for now due to an El Niño pattern that warms the Pacific and suppresses Atlantic storm activity.

The broader takeaway, Strickland said, is that tight markets amplify volatility: any incremental demand increase or supply disruption will produce outsized rate moves. “Tight markets have increased volatility,” he said. “So even if we stabilize, any nuance or disruption that comes in then becomes a little bit more volatile.” He expects van spot rate swings to remain the defining market dynamic through the end of the year — a pattern shippers and brokers will be watching as peak fall freight season approaches.

In short: the national Tender Rejection Index climbed back above 14% for the first time since early August, rising faster than in each of the past three Labor Day periods. Capacity has not meaningfully expanded after roughly six to seven months of slowing contraction, keeping the market highly sensitive to any demand increases. Van spot rates are the most volatile of the three major modes, with swings Strickland compared to COVID-era conditions.

This summary is based on a transcription of the interview; the full interview is available in the video above. The post Tender Rejections Jump 14%: Labor Day Tightens Freight appeared first on FreightWaves.