Driver turnover situation is not abating, according to ATA data

The American Trucking Associations (ATA) reported today in its quarterly Trucking Activity Report that the annualized turnover rate for linehaul truckload fleets of all sizes increased in the second quarter, as turnover at large fleets eclipsed the 100 percent mark for the first time in more than four years.

Driver turnover has increased six times in the last seven quarters. ATA officials said that the turnover rate for large truckload fleets—those with more than $30 million in revenue—increased 16 percent to 106 percent, which is the highest level of turnover since the fourth quarter of 2007 and the first time the driver turnover rate topped 100 percent since the first quarter of 2008.

And for smaller truckload fleets, the turnover rate increased 15 percent to 86 percent in the second quarter from the first quarter, putting small fleet turnover at its highest level since the third quarter of 2007, said ATA.

On the less-than-truckload side, where driver turnover is traditionally less prevalent due to shorter transit times and less time spent away from home, the second quarter turnover rate was 9 percent, marking a gain of 1 percent from the first quarter of 2012.
“We continue to see steady, albeit sluggish, growth in freight volumes, which increases demand for drivers,” ATA Chief Economist Bob Costello said in a statement. “That, coupled with continued pressure on fleets to improve their safety records as a result of regulatory oversight changes, is increasing competition among carriers for drivers with clean histories.”
The ATA executive added that ATA has believed the driver shortage is more qualitative than quantitative and that in raw numbers the trucking industry is short by roughly 20,000-to-30,000 drivers. But is freight volumes are to continue growing he explained that number could increase soon and make matters worse.
As LM has reported, driver turnover and tight capacity are two things that clearly go hand in hand in the trucking industry, especially during the current tight market conditions, spurred on by a slow economic recovery and the December 2010 implementation of CSA, as well as planned changes to truck driver hours-of-service (HOS) regulations that are set to take effect in mid-2013.

What’s more, regulations like CSA and HOS, as well as Electronic On Board Recorders (EOBR) continue to play a major role in carriers’ being hesitant to increase capacity and subsequently hire drivers, which continues to be challenging, as evidenced by ATA’s data.

Stifel Nicolaus analyst John Larkin observed in a September conference call hosted by his firm that the truckload driver shortage may in fact represent the biggest obstacle for carriers to increase existing capacity.

“The regulations are blackballing a certain number of people out of the industry,” said Larkin. “And as the Generation X/Generation Y folks enter the workforce probably one of the last things they want to do is become a truck driver. The industry is struggling to attract people who meet their criteria in terms of passing drug tests, are willing to follow instructions and can succeed in getting a commercial drivers license. They are really struggling to find those people and hang on to them as there is still a fair amount of poaching from one carrier to another that goes on.”

Projections from freight transportation forecasting consultancy FTR Associates estimate that this problem is likely to get worse and by 2014 the driver shortage could be in the 250,000 range, which Larkin said is going to create a capacity shortage which will translate into “fairly sizable rate increases” that might be steeper than what has occurred during the slow growth period over the last couple of years.

Werner Enterprises President and COO Derek Leathers said in a recent interview that the ongoing driver shortage situation has paved the way for a major convergence of costs of sorts.

“The number one cost is salaries,” he said. “For the 11 publicly-traded truckload drivers from the third quarter of last year to the fourth quarter, carriers reduced the size of their fleets even though it was one of the best freight quarters in recent history. The driver shortage situation is real, and wage inflation is going to happen. Our job is to create a better environment for drivers and get them home as frequently as we can. It is hard to do in an irregular route environment, but we do the best we can.”