Driver turnover rates head in opposite directions, says ATA

First quarter driver turnover rates headed in opposite directions, according to data issued by the American Trucking Associations (ATA).

The first quarter turnover rate for large fleets with more than $30 million in revenue increased 5% to 83%, which was lower than the 2018 average rate of 89% and down 11% compared to the first quarter of 2018.

For small fleets, the ATA said the turnover rate fell 4% to 73%, from the first quarter to the second quarter, and was flat annually and also matching the full-year 2018 turnover rate at 73%, representing the lowest rate for small carrier driver churn going back to 2011. Less-than-truckload (LTL) driver turnover saw an 8% uptick to 18%, which ATA said marks its highest level in 15 years, while still well below the rate of driver turnover on the truckload side.

“While the market for drivers in certain segments continues to be tight, we’re seeing the impacts of a softer freight environment,” ATA Chief Economist Bob Costello said in a statement. “Despite weaker freight growth, it is clear that there is still strong demand for quality drivers industry wide, which will continue to put carriers under pressure to recruit and keep good ones.”

At the RILA conference earlier this year, Costello said that a key factor for driver turnover has been compensation, which has lagged for a long time.

“If you look at what driver pay was in 1980 compared to now in real currency terms, it was higher then…so we still have a lot of catching up to do,” he said.

But there have been signs of improvement with large turnover rates falling 20% over the second half of 2018, as per ATA data, with Costello pointing to pay increases as the reason for that reduction. But that situation could change, even if the next recession is mild, he said, as it could lead to a fair amount of carriers exiting the business, as it will be difficult for them to keep those pay increases intact.

A 2018 conference call hosted by Stifel, featuring Gordon Klemp and Leah Shaver from NTI presented a potentially positive outlook for the driver shortage showing signs of improvement, with the pair saying they expect driver wages to be higher in 2019, in the 6%-to-10% range annually, with the caveat, though, that driver wages will not rise unless they are commensurate with rate growth.

Stifel analyst Dave Ross explained in a research note highlighting this call that his firm believes that the driver shortage is a simple commodity shortage driving truckload rates higher.