The latest episode of the Freightvine podcast tackles one of the most problematic yet persistent issues in freight transportation – the ongoing driver shortage. Join our host Chainalytics’ Chief Scientist Chris Caplice and Bob Costello, Chief Economist & Senior Vice President of the American Trucking Associations, as they discuss possible remedies to the situation.
The driver shortage is here, and the prospects for the future are uncertain
American Trucking Associations’ Chief Economist and Senior Vice President Bob Costello reports that we could face 100,000 driver shortage by 2023, and the potential exists for it to be worse than that. Then again, some believe that the free market and price incentives will ensure that we meet all demand, and there will be no shortage as a result. Whichever view you take, the challenges Costello points to will impact the rates that shippers will ultimately pay. While Costello focuses specifically on the over-the-road (OTR) truckload (TL) for-hire market, he also shares his perspective on how the demographics of LTL and private fleets will impact the OTR TL for-hire driver market.
Bob Costello has been with the American Trucking Associations’ (ATA) – the national trade association for the trucking industry – for over 20 years. As Chief Economist, Costello manages all of the collection, analysis, and dissemination of trucking economic information. Costello’s research focuses on trucking economic analysis, proposed regulations, and, of course, the driver shortage.
ATA released the latest examination of the driver shortage in July 2019. Their formula for calculating the size of the shortage is a function of all freight needing transport per year, compared to the optimal number of drivers required to move that freight. Costello points out that this formula does not account for the quality of the workforce; therefore, the driver shortage feels worse to carriers than the actual numbers would indicate as they deal with variations in productivity and efficiency.
As reported by ATA, the shortage at the end of 2018 was over 60,000 drivers and could grow to 100,000 by 2023 and 160,000 by 2028. Costello does not believe we will reach these numbers but instead warns that if nothing changes, things could get that bad. The shortages are for the entire industry, but the issue impacts OTR TL for-hire fleets in particular – not LTL or private fleets.
Costello does point out that LTL and private fleets have acute driver concerns of their own. LTL and private fleets’ driver populations have higher average ages of, respectively, 57 and 60. These average ages compare unfavorably to the OTR TL for-hire average of 46. He expects that as the LTL and private fleet drivers retire, they will hire away the most qualified drivers from OTR TL for-hire fleets. In the next ten years, he expects the industry to need 1 million new drivers, 50 percent of which will go towards replacing retiring drivers. The long-haul lifestyle and the minimum legal interstate commercial driving age of 21 seem to be two of the most significant barriers to attracting new drivers.
Most proposed solutions fall into two categories: increasing utilization of existing capacity, and increasing driver supply. Specifically, Costello suggests lowering the interstate commercial driver age limit, increasing the population of female drivers, and driver-assistance technology (semi-autonomous vehicles) as a means to increase the productivity of existing drivers. He also discussed ways to make drivers more productive, like lowering driver wait times at shippers and increasing overnight parking availability. The lack of parking is a frequent complaint of drivers – many will end a driving stint prematurely when finding a space for the night.
There’s no silver bullet. Improvements in data sharing from electronic logging devices (ELDs) can only help bring visibility to problems, not help generate solutions. Shippers can also intervene and consider the benefits of collaboration where they can, helping to reduce their own long-run cost burden.
This episode recap was written by Chad Kennedy, Sr. Product Manager, FMIC Pulse.
Market Update & Forecast: 12 March 2020
Dry Van
Active contract rates are down 1%, spot rates are down by 3%, and replacement rates are negative at -2.5%.
Temp-Control
Active contract rates went down by 0.5%, spot rates decreased 2.5%, and replacement rates are negative at -2%.
Intermodal
Both active contract rates and spot rates decreased 0.5%, while replacement rates are negative at -3%.
Spot rates are back down to the levels the second and third fiscal quarters of 2019 for all of the three modes – Dry Van, Temp-Control, and Intermodal. Replacement rates are negative which means active contract rates are starting to trend downward again. The novel coronavirus outbreak, the corresponding drop in oil prices, and stock market fluctuations are the big wildcards this week. These factors could play out as a short-term blip, one way or the other. Our team continues to closely monitor the situation.
