Truck driver turnover falls in second quarter; freight industry recovers faster than broader economy

Turnover in the trucking industry plummeted amid the COVID-19 pandemic as the U.S. economy looks to make a K-shaped recovery instead of a V-shaped one, analysts said.

The annual turnover rate at large and small truckload carriers declined by double-digit percentage points in the second quarter, and the impact to the rates can be attributed to the pandemic.

“The second quarter was a tumultuous one for trucking, and the broader economy, as restrictions imposed to slow the spread of the COVID-19 had significant impacts on the country,” said Bob Costello, chief economist for the American Trucking Associations. “The coronavirus had a profound impact on the driver market — particularly in the first part of the second quarter. But by the end of the quarter, we had begun to see the market tighten again as various restrictions began to be lifted.”

In the second quarter, the turnover rate at truckload carriers with more than $30 million in annual revenue declined by 12 percentage points to 82% — the lowest level since the end of 2018. The rate at smaller truckload carriers declined by 10 percentage points to 60%, the lowest level since the fourth quarter of 2011.

“After steep drops early, the driver market began to normalize toward the end of the quarter,” Costello said. “As the economy continues to recover, we should see the market for drivers continue to tighten going forward.”

The U.S. economy is recovering in a K-shaped pattern, and this means some segments are experiencing a V-shaped recovery while others face an L-shaped path, according to a recent ACT Research report.

“Fortunately for freight economy, the pattern has been more V-shaped,” said Kenny Vieth, president and senior analyst for ACT Research. “The story for the transport sector and particularly for heavy-duty trucks can be summed in two words: surprisingly strong.

“Over-the-road carriers are enjoying a period of volume growth and pricing power that would have been considered shocking, though welcomed, from an April 2020 vantage point,” he added. “The underpinnings for this strength include the lighter impact of COVID-19 on goods-producing sectors, which are truck intensive, as compared to the devastation still being felt by services sectors, which are not trucking intensive. In addition, the consumer spending substitution away from experiences and toward goods, pent-up demand for inventory restocking, a hot housing market, low-interest rates and low energy prices are supporting freight.”

Vieth noted a fair question would be whether these trends would continue post-pandemic, but they have been influential for the commercial vehicle markets.

However, not all freight segments are experiencing strong demand equally. This is evident in the ATA’s advanced seasonally adjusted For-Hire Truck Tonnage Index, which fell 5.6% in August after decreasing 1.4% in July.

“The August softness suggests that freight is very uneven in the trucking industry,” Costello said. “The trucking sectors that haul for the industrial and energy industries are not seeing the surge in freight like the consumer side of the economy. The industry loads tend to be heavier, so they count more in a tonnage calculation than most consumer-related loads. Fleets hauling for retailers are generally seeing strong freight volumes. Carriers hauling heavier industrial products generally saw softer volumes in August.”

The index fell 8.9% in August, from the same month in 2019, and this was the fifth consecutive year-over-year decline. Between January and August, tonnage has fallen 3.4%, from the same period in 2019.

The Cass Freight Index for shipments fell 7.6% in August, from the same month in 2019. The Cass Freight Index for expenditures fell 5.1% in August, from the same month in 2019.

The index shows the freight economy continues to recover, and the recovery continued into September. The index values are projected to return to year-ago levels in the coming months but likely will remain down year-over-year until 2021. Rail traffic has been growing faster than the Cass Freight Index, but rail accounts for a small part of the index and a small part of the overall freight spend in the United States.

“Still, all signs point to an improving economy, and goods movement is getting better every month,” according to the report for the Cass Freight Index.

For carriers, revenue per shipment has been rising as trucking rates increase because of constraints on driver and industry supply, the report shows. Little new capacity is expected to be added to the industry this year, and with capacity tight, the average freight bill is expected to rise.

The Cass Truckload Linehaul Index, which measures per-mile linehaul rates and focuses on the largest market in domestic transportation, declined 4.3% in August, from the same month in 2019. However, it was the highest reading of 2020, and this indicates truckload pricing has taken a turn. This can be attributed to supply and improving volumes.

“Even as contract rates are only starting to move higher, shippers are having to pay more to get their freight moved, as carriers are turning away load requests with high frequency,” according to the report. “The pricing outlook remains bullish for carriers, as spot rates are tracking much higher (year-over-year) in the dry van, flatbed and reefer markets, with dry van actually above 2018 peak levels. The rebound in rates from here will just depend on the strength of the recovery coupled with the sustainability of industry supply constraints.”

Dry-van spot rates rose 22.2% in August, from the same month in 2019, and have continued to rise into September, according to DAT Solutions.

“Spot market truckload rates are in their longest continuous rally in five years, as supply chain disruptions continue to push truckload shipments over to the spot market,” according to DAT. “Load-to-truck ratios did decline for vans and reefers for the second straight week, however.”