Driver exits could extend capacity crunch

Chart of the Week:  Driver Turnover – Company and Leased Fleet, Employment Levels – Trucking Sector SONAR: DRVTO.VCFOO, EMPS.TRUK 

Shippers who are expecting the current trucking capacity crunch to end in the same manner it did in 2018-19, with carriers rushing to hire drivers and add equipment, may be left wanting.

The Labor Department reported this past week another 1.4 million jobs were added to the economy in August. One would think the transportation sector would be the beneficiary of many of those positions due to the rapid recovery in the sector starting in May. In actuality, trucking has been slow to add drivers and capacity back into the mix, and the rapid job growth in other areas of the economy may be inhibiting some carriers’ ability to hire and retain workers whose options are currently expanding.

Many of the trucking jobs lost in April have not been refilled. According to the Bureau of Labor Statistics (BLS), employment levels for trucking were still 5.8% under February in July on a seasonally adjusted basis — recovering only 0.5% since April. From an annual perspective, employment levels are 6.3% under where they were at the end of July in 2019.

Truckload volumes recovered much faster than expected. Chart: SONAR – OTVI.USA

The slow employment recovery is vastly divergent from trucking volumes. Overall trucking volumes have recovered beyond previous-year levels. Accepted tender volumes were 18% higher than last year on Aug. 31, according to FreightWaves tender data. In other words, carriers are doing more with less. 

The Truckload Carriers Association (TCA) reports its dry van members saw a sharp increase in driver turnover in July from June — driver turnover increased from  61.5% to 76.06%. This was the largest single-month jump since January 2019. TCA members reported a driver turnover rate of 80.7% at the end of July 2019. 

Turnover percent is a measure of how fast you lose and replace your employees. A driver  turnover rate of 76% means that over three-fourth of your drivers quit or are terminated each year and are replaced. Truck drivers have a notoriously high turnover rate, with many midsize and larger carriers seeing turnover rates above 100% — something unheard of in many industries.

Turnover rates are a function of economic options. If there are abundant jobs available, turnover rates tend to increase. Driver turnover dropped to 55.8% in April when the economy shut down but has recovered quickly — an indication that options have as well.

Construction employment levels are recovering at a faster clip than the trucking sector. Chart: SONAR EMPS.CONS, EMPS.TRUK

The concern for carriers will be in whether or not drivers will be permanently leaving the space for other sectors. One of the main competing sectors for drivers is construction. Since April, construction employment levels have increased 10% compared to trucking’s 0.5%. Like transportation, construction was not hit as hard by the COVID-19 outbreak and subsequent economic shuttering and in many cases did not feel the initial hit at all as their jobs are already socially distant. 

The volatility of the trucking space over the past three years has been somewhat unprecedented, and many drivers get tired of the inconsistencies of what that brings. Inconsistent routes and work mean inconsistent schedules, home time and most importantly pay. 

Unlike the transportation boom in 2017-18 — led by a perfect storm of economic activity, tax cuts and natural disaster recovery — there is not nearly as much optimism around the sustainability of the current activity level and rate environment. The secondary theme of 2020 has been uncertainty, and plenty of it remains around transportation in the long term. This uncertainty is motivating many drivers to explore more of what they feel may be more sustainable or simply different options. 

Ironically, this same sentiment existed in 2018 with the electronic logging device mandate. Many thought there would be a mass exodus due to drivers not wanting to be tracked with such precision. The rate environment and demand convinced many to stay. Now after what was a relatively slow 2019, many of those drivers may be less moved by high rates and consistent work than they were two years ago. 

Combine this with the fact that many driver schools were shut down by the virus earlier in the year, and driver shortages are a legitimate concern over the next several months to a year if demand holds.

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on for future reference.

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