Trucking index up but industry faces driver shortages

The American Trucking Associations’ Truck Tonnage Index — a key measure of health in the national trucking industry — rose 2.8% in June following a revised 2% decline in May.

ATA Chief Economist Bob Costello says manufacturing output gains and driver shortage issues will play a big part in the industry’s health for the remainder of 2011.

Compared with June 2010, truck tonnage jumped 6.8%, the largest year-over-year gain since January 2011, according to the ATA. In May, the tonnage index was 3% above a year earlier.

“Motor carriers told us that freight was strong in June and that played out in the data as well,” Costello said, adding that tonnage recovered all of the losses in April and May when the index contracted a total of 2.6%.

According to the ATA, trucking serves as a barometer of the U.S. economy, representing 67% of tonnage carried in 2010 by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled more than 8.8 billion tons of freight in 2009. Motor carriers collected $544.4 billion, or 81% of total revenue earned by all transport modes in 2009.

“After growing 5.5% in the first half of the year from the same period last year, the strength of truck tonnage in the second half will depend greatly on what manufacturing output does,” Costello noted. “If manufacturing continues to grow stronger than GDP, I fully expect truck freight to do the same.”

Unfortunately, the federal government reported Wednesday (July 27) that new orders for manufactured durable goods fell 2.1% in June. The orders have declined in two of the past three months, and the June dip was the largest in the previous six months.

Costello has also said driver turnover is becoming a problem for the trucking industry.

The ATA reported in late June that the turnover rate for drivers at large truckload fleets rose to an annualized rate of 75% in the quarter ended March 31 – up from 69% in the fourth quarter of 2010 and a low of 39% in the same quarter last year.

“The driver market is tightening,” Costello said. “We hear nearly every day from fleets who cannot find enough drivers to meet demand.”

Turnover at small truckload fleets rose just one percentage point to 50% in the first quarter, reaching its highest point since the third quarter of 2008. Less-than-truckload (LTL) fleets continued to experience a very low turnover rate, with the figure rising to 8% from 6% the previous quarter.

David Humphrey, vice president of investor relations and corporate communications for Fort Smith-based Arkansas Best Corp., said the company’s turnover is low. Arkansas Best is the parent company of ABF Freight Systems, one of the largest LTL operations in the U.S.

“We offer a superior driver job with good working conditions, wages and benefits. ABF’s drivers are typically home every night or every other night. We operate newer equipment which is also attractive to drivers,” Humphrey said.

Reports from truckload carriers in Arkansas confirm Costello’s observations.

Van Buren-based USA Truck recently said 10% of its trucks sat idle at the end of the first quarter because of a driver shortage. During the second quarter, driver recruiting and training costs were 20% higher for USA Truck. Driver compensation, recruitment and training reduced earnings by 11 cents per share during the second quarter.

As part of its second quarter earnings report, Tontitown-based P.A.M. Transportation reported Wednesday (July) that increased driver compensation related to driver shortages resulted in higher operating costs.

“We have also seen competition for drivers, and the expenses associated with recruiting and retaining them, returning to levels more consistent with pre-recession periods,” Daniel Cushman, company president, said in the earnings report.

Even at Lowell-based J.B. Hunt Transport, which has proven financially resilient during the national recession, driver shortages are driving up recruitment, training and retention costs.

“With the economy continuing to recover from the Great Recession, the implementation of new regulations and the number of retirees outpacing the number of drivers entering the industry, I expect to see the turnover rate continue to rise,” Costello said.