Turnover Matters

While the turnover rate at large truckload carriers dipped in the fourth quarter of 2012, the issue of finding and retaining qualified drivers remains a top priority for pretty much all carriers.

This was evident in today’s release of the American Trucking Associations’ (ATA) Trucking Activity Report, which noted that large truckload carrier turnover fell from an annualized rate of 104 percent in the third quarter to 90 percent in the fourth quarter, marking the lowest turnover rate since the first quarter of 2012. The ATA added that for all of 2012 large truckload carriers had a 98 percent turnover rate since 2007’s apex of 117 percent.

For smaller truckload fleets, the ATA said the turnover rate fell to 76 percent in the fourth quarter, down from 94 percent in the third quarter, with 2012’s overall turnover rate at 82 percent, which was its highest rate since hitting 90 percent in 2007.

“As freight volumes slid a bit at the end of 2012, we saw turnover follow suit,” ATA Chief Economist Bob Costello said in a statement. “However, this is just a respite from the long-term trend and driver shortage storm that’s coming when the freight economy accelerates; and even then, these relaxed levels are still quite high relative to recent years. Once we see steadier, more robust economic growth, we could see an industry that is short by as many as 239,000 drivers by 2022,” Costello said. “Hard as it may to believe, we may someday soon look back on turnover rates of just 90 percent as the good old days as increased demand, an aging workforce and regulatory constraints combine to push the shortage higher.”

What’s more, Costello added that the trucking sector is still short anywhere between 20,000-25,000 truckload drivers, which he said could rise due to a healthier economy in the future.

As LM has reported, driver turnover and tight capacity are two things that clearly go hand in hand in the trucking industry, especially during the current tight market conditions, spurred on by a slow economic recovery and the December 2010 implementation of CSA, as well as planned changes to truck driver hours-of-service (HOS) regulations that are set to take effect in mid-2013.

And regulations like CSA and HOS, as well as Electronic On Board Recorders (EOBR) continue to play a major role in carriers’ being hesitant to increase capacity and subsequently hire drivers, which continues to be challenging, as evidenced by ATA’s data.

Projections from freight transportation forecasting consultancy FTR Associates estimate that this problem is likely to get worse and by 2014 the driver shortage could be in the 250,000 range, which Stifel Nicolaus analyst John Larkin said is going to create a capacity shortage which will translate into “fairly sizable rate increases” that might be steeper than what has occurred during the slow growth period over the last couple of years.

Gordon Klemp, founder and president of the National Transportation Institute (NTI), Kansas City, Mo., studies truck driver availability, compensation, turnover and fleets’ ability to attract suitable drivers. He said in a previous interview that driver supply has diminished during the past several years and shippers should be prepared to pay higher freight rates to reflect fleets’ higher compensation levels to retain adequate driver supply.

“I see it as inevitable,” Klemp told LM. “This is a market that is short of drivers right now. Drivers don’t seem to be available in any (region) in good numbers. We have lost a significant amount of drivers to retirement. We had an old driver work force in 2000. Roughly a-third of that driver fleet has reached retirement age.”