The trucking industry is more or less the life source of the United States economy. Almost 70 percent of freight tonnage moved in the U.S. is moved on trucks. But in order to move 9.2 billion tons of freight in a year, nearly 3 million heavy-duty Class 8 trucks and over 3 million truck drivers are needed. Here are a few of the issues that the trucking industry is facing.
More important than the trucks are the drivers. Without drivers, trucks can’t be filled and trucking companies can’t operate. In 2010, 3 million truck drivers were employed. In 2012, there were 1.7 million heavy and tractor-trailer truck drivers. Now, despite the national unemployment rate being over 7 percent, the trucking industry is struggling to find enough qualified drivers. There is a shortage of about 35,000 drivers due to various reasons, including regulations, demographics, and the fact that drivers have to be away from home for a long period of time, among other things. It’s a drag on truckers, especially for those working at companies that make long hauls and pull trailers that typically carry goods from a single customer.
With global oil companies cutting 50,000 or more jobs, truckers might be after the newly unemployed oil workers. Todd Fowler, a KeyBanc Capital Markets Inc. analyst, believes that truckers may see more workers start to trickle into driving academies over the course of the year, and the industry might start to see benefits in the second half once former oilfield employees complete the average four to eight weeks of training and obtain commercial licenses. Trucking companies will need to compete with construction and manufacturing industries that are trying to attract the newly unemployed as job openings reach an almost 14-year high.
“As we’ve seen unemployment tick down, we’ve seen this ongoing driver shortage that’s always in the background start to become more prevalent. Even if we see a few more drivers come in, we go from being very tight to being less tight,” said Fowler.
Most freight indices were at or near all-time highs through December of 2014. Through most of 2014, monthly trends continued to be positive while year-over-year tonnage growth continued to reflect a strong economic rebound yielding a 5 percent annualized GDP growth during the 3rd quarter. The FTR Truck Tonnage Index hit an all-time high in December, increasing 2.1 percent from November and 1.6 percent year-over-year. The For-Hire Truck Tonnage Index from the American Trucking Association (ATA) finished 2014 at a record level, up 3.5 percent for the year, despite a very slow start. The month of December also held steady at an all-time high, which was 5.2 percent higher than the previous year.
Revenue and Expense Indicators
The Cass Freight Implied Rate Index showed that while December freight shipment volumes declined 6.3 percent from November, total expenditures incurred to ship those volumes decreased by a similar 6.7 percent. The upward trend may be the cause of labor costs being offset by a reduction in fuel surcharges. In a Q4 survey from GE Capital Transportation Services, the surveyed carriers plan to add more tractors and trailers and hire more employees.
About 50 percent of the mid-market motor carriers said that as they increase business with their current customers and expand regionally, they will add more equipment in the next year than in the previous year. According to an article in the Journal of Commerce (JOC), the U.S. economy has been expanding at a rate greater than 3.5 percent for four of the last five quarters, creating enough freight demand to significantly boost trucking revenue while tightening supply to the point where carriers can gain considerable rate increases.
The issue with the trucking industry isn’t with tonnage or revenue and expenses. It seems to lie in the shortage of drivers. Turnover rates are reaching all-time highs for various reasons, but with trucking industry improvements and other industry job cuts, trucking companies will sure enough be back in business to keep this country going.