Top transport economist predicts “reasonable decade” for trucking

A top transportation economist is predicted “sustained growth” in trucking freight demand for this decade as the nation recovers from the Great Recession, a credit crisis, two wars and the 9/11 terrorist attacks marring the first decade of this century.

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A top transportation economist is predicted “sustained growth” in trucking freight demand for this decade as the nation recovers from the Great Recession, a credit crisis, two wars and the 9/11 terrorist attacks marring the first decade of this century.
 
This soft recovery will include growth in manufacturing, which should help transports, but will have a spectacular upside like some recent economic recoveries following slumps. Perry is basically optimistic in the short term (2-3 years) but more negative in the longer term because of the nation’s long-term debt levels.
 
“The economy will be growing more slowly,” said Noel Perry, a transportation economist who founded Transport Fundamentals and senior consultant with FTR Associates. “It is unlikely we’ll get sustained growth for 10 years.”
 
Perry is predicting 2.6 percent in full year growth in truckload freight for 2012. That is slightly less than the 2.9 percent growth in 2012, according FTR Associates’ forecasts.
 
Perry said despite headlines decrying lesser growth in the overall economy, truckers should be buoyed after riding out the recession.
 
“You should not be crawling into a hole if you’re in the trucking business right now,” Perry said recently at a gathering at the annual meeting of the North American Transportation Employee Relations Association (NATERA).
 
The reason the economy is growing so slowly is that jobs have disappeared in the wake of the greater productivity gains through technology and the communications revolution, Perry said.
 
“Don’t worry about overall unemployment and its effect on the economy,” Perry said. “Economies can recover with high unemployment. It’s happened before.”
 
Perry said a slow-growth recovery is actually beneficial for trucking, which has a difficult time attracting adding capacity in the wake of greater scrutiny of unsafe drivers, demographics, greater regulations and a 35 percent increase in the price of Class 8 trucks in the past five years.
 
Truck driver hiring remains weak despite stronger carrier financial gains this year. Some 95 percent of the nation’s 3 million long-haul truck drivers are white males, and demographics are working against the industry, Perry said. Driver pay increases have lagged behind inflation rates, Perry added, making driver recruitment harder.
 
Perry said it will take “several years” to hire enough capacity. He is predicting a driver shortage of perhaps as many as 100,000 drivers a year. That number would increase with greater “regulatory drag” such as decreased hours of service.
 
“The most important person in any trucking operation is the director of driver hiring,” Perry quipped.
 
This all means higher rates for shippers. The only shippers who can gain some edge in truck rate negotiations are those who can make life easier for carriers through increased amounts of driver friendly freight and other improvements in supply chain management.
   
Perry said transport interests should differentiate between what’s happening in the overall economy (barely growing at 2 percent annually) and what’s happening in freight demand, Perry said.
 
“It looks like this is going to be a reasonable decade for trucking.”
 
Just not quite yet, industry leaders say.
 
Barbara Windsor, president and CEO of Hahn Transportation, a major tank trucking company based in Hancock, Md., a former chairman of the American Trucking Associations.
 
“There is not much (economic) movement in trucking,” Hahn said. “Maybe a tad bit. But we just haven’t seen that much.”
 
Hahn is predicting that when the government gets around to changing driver hours of service, it will reduce actual driving hours from 11 to 10, a shortened overall on-duty time from 14 to 13 hours as well as mandate two 15-minute breaks as well as the requirement that drivers sleep at least two nights from midnight to 6 a.m.
 
Those changes were expected to be proposed by now, but have been delayed by the bureaucracy in Washington.
 
When the Federal Motor Carrier Safety Administration (FMCSA) does change hours of service, Hahn said the ATA will immediately challenge it in the courts.
 
“We don’t know when it will come out but we’re ready to go (and file suit)” Hahn said.
 
There currently is a stay on requirement for electronic on-board recorders (EOBRs), but Hahn said it’s eventually going to become law.
 
“It’s going to happen,” Hahn predicted.


About the Author

John D. Schulz
John D. Schulz has been a transportation journalist for more than 20 years, specializing in the trucking industry. John is on a first-name basis with scores of top-level trucking executives who are able to give shippers their latest insights on the industry on a regular basis.

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From the July 2016 Issue
While it’s currently a shippers market, the authors of this year’s report contend that we’ve entered a “period of transition” that will usher in a realignment of capacity, lower inventories, economic growth and “moderately higher” rates. It’s time to tighten the ties that bind.
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