The trucking sector is experiencing a reduction in capacity, which could last until 2021, and a leading factor is the lack of available drivers.
Driver retirements, career changes and the impact of the pandemic on driver licensing offices and training schools are contributing to the shortage. The industry could be down as many as 200,000 drivers by the end of the year, according to a US Xpress official, as volumes pick up.
Many drivers are reluctant to return to work, likely because of the pandemic, said Dean Croke, principal analyst for DAT, and that is contributing to reduced capacity. Driver hesitancy is mixed with the usual suspects and some new players: rising volumes, not enough physical freight capacity yet being added and a national imbalance in freight volumes caused by the pandemic and uneven recovery, Croke said.
The lack of drivers is a big piece of the puzzle, said Derek Leathers, CEO of Werner. And it explains why the market can’t quickly add capacity, even when signs point to an increase in demand.
“We clearly have a supply and demand imbalance,” Leathers said. “Normally, the market reads that by adding capacity … It’s going to take a long time to add that capacity back.”
Drivers caught in “clogged” training pipeline
Don Lefeve, president and CEO of the Commercial Vehicle Training Association, saw the signs pointing to upcoming driver and capacity issues. Training and licensing processes were slowed, Lefebv said, meaning that even if new recruits arrived, it would take time to get into the driver’s seat.
“When you start to see the economy turn around … you’re going to see a huge capacity crunch,” Lefeve said in June. “[The driver shortage] will go from nothing on steroids.”
The issue surfaced in the second quarter, even as some fleets laid off drivers during that turbulent period. In YRC’s Q2 earnings presentation, CFO Jamie Pierson told analysts“I can tell you with 100% certainty that the capacity crunch is real. We are struggling to hire drivers to keep up with the increase in volume.”
“We think there are likely to be 150,000 to 200,000 drivers out of the market within this calendar year.”
Eric Peterson
CFO of US Xpress
Before the COVID-19 pandemic, the American Trucking Associations first documented the driver shortage in a 2005 report, when they put the number at 20,000. Since then, the problem has grown. In the July 2019 report on driver shortagesATA chief economist Bob Costello put the number at 61,000 for 2018.
The American Transportation Research Institute found that the issue was the #1 concern in the industry, publishing its findings in its annual report in October 2019. ATRI officials said that, in the long term, there could be a “potential shortfall of more than 100,000 drivers over the next five years.” Then came COVID-19.
Driver shortage consistently ranks as a top issue
2015 | 2016 | 2017 | 2018 | 2019 | |
---|---|---|---|---|---|
1 | HOS | ELD command | Missing driver | Missing driver | Missing driver |
2 | Compliance and security | HOS | ELD command | HOS | HOS |
3 | Missing driver | Regulations | HOS | Driver maintenance | Driver compensation |
4 | Driver maintenance | Truck parking | Truck parking | ELD command | Reservation/delays |
5 | Truck parking | Economy | Driver maintenance | Truck parking | Truck parking |
Source: The American Transportation Research Institute
Leathers, whose company owns several training schools, said the pandemic, so far, means U.S. license offices have issued 100,000 fewer CDLs than this time in 2019 because they have closed or slowed issuance. And driver performance, the process by which a student goes from training to obtaining a CDL, is down 40 percent, Leathers said.
Community college campuses and trucking schools canceled in-person classes for a while and then instituted social distancing measures. In 17 states, the backlog for obtaining a commercial learner’s license is 30-90 days, with social distancing and COVID-19 prevention measures causing delays, Lefeve said.
“We can’t start road training without a CLP,” Lefeve said — it’s the first physical step to getting a CDL. “You are only as good as your weakest link.”
Lefeve said recruiting for CDL schools is going well, but they’re caught in a “clogged” pipeline.
“It will take a long time to add that capacity back.”
Derek Leathers
CEO Werner
The industry also deals with driver retirements. Trucking is older than most industries, according to a 2019 shortage report from the ATA. “The median age of truck drivers on the road is 46, compared to just 42 for all U.S. workers.” (The ATA does not track driver retirements by month or year and has no numerical estimates.)
Eric Peterson, CFO of US Xpress, told analysts during his company Q2 earnings call on July 28 that, with all the factors included, such as terminations for drug and alcohol violations, “we believe it is likely that there will be 150,000 to 200,000 drivers who will exit the market within this calendar year.”
Of the Labor Department The Bureau of Labor Statistics reported The trucking sector lost about 82,000 drivers in August, compared to August 2019.
Fleets struggle to recruit as pandemic fatigue sets in
Almost twice as troubling as the latest BLS data is Costello’s forecast eight years from now: “If current trends continue, the shortage could swell to over 160,000 by 2028.”
After retirements, the second biggest reason for needed drivers is industry growth, which will account for 25 percent of demand for new hires, Costello wrote. Growth and scarcity are seen in current statistics, mixing like oil and water.
“Tender rejections are at their highest levels since we began tracking in February 2018,” said Craig Fuller, CEO of FreightWaves, in an email to Transport Dive. “The driver ‘squeeze’ is real. Drivers are not coming back and finding alternative work in manufacturing, warehousing and local delivery.”
COVID-19 initially reduced turnover and retention increased, as drivers were reluctant to make a career leap during a pandemic, according to Max Farrell, CEO of WorkHound, a real-time feedback platform used by companies transport and distribution. Then something changed in the summer.
“In July and August, it was almost like a light switch went on,” Farrell said.
Fleets went from holding records in Q2 to racing to find enough drivers to meet demand, Farrell said.
“There is speculation that there is pandemic fatigue” among drivers, he said.
Farrell said competition from other industries, such as construction, is a factor. Since June, 43,000 construction jobs have been added. according to seasonally adjusted data from the BLS.
Fleets are responding to competition from other industries by studying how to allow drivers to spend more time at home, Farrell said. Looking at how long lanes work is one point of consideration, Farrell said, and allowing shorter, more peripheral transfers is another.
How to deal with shrinking classes
The industry is making some progress in adding workers back. The BLS reported the trucking sector added 10,000 jobs in August, compared to July. However, the August numbers were down 5.4% year-on-year (y-o-y).
The federal government is working on solutions.
FMCSA announced on September 4 that it will take a round of public comments on another pitch for a pilot program allow drivers aged 18 to 20 to operate motor vehicles commercially on state lines. This is based on that of the agency 2019 request for comments.
Drivers ages 18 to 20 can drive in 49 states and the District of Columbia now (Hawaii is the exception), but they can’t cross state lines. Supporters say the rule will help ease the driver shortage, but the Teamsters, the Independent Driver Owner-Operator Association, Highway and Freeway Safety Advocates and others oppose the proposal.
“I would be shocked if no wage increases are announced in the 4th quarter.”
Max Farrell
CEO, WorkHound
Farrell said fleets will likely take this first and most obvious step toward returning, retaining and hiring drivers in a few weeks.
“I would be shocked if there are no wage increases announced in the 4th quarter,” Farrell said. “[Fleets] they’re trying to figure out how they can gain a competitive advantage in pay.”
Farrell said another step fleets can take to retain and attract drivers is to talk about why their fleet is the best to work for and how concerns are addressed.
“We’re still in a pandemic. Now is the time to overcommunicate,” Farrell said. “Talk about what you’re doing to keep the business strong.”