Can you believe it is already almost 2022? If time flies, this year feels like it has been a rocket ship. It feels like the beginning of the COVID-19 pandemic was not so long ago, yet we find ourselves in year two of the crisis. We’ve spent a lot of time reporting on how the trucking sector has fared during the pandemic. With 2021 ending, what’s the outlook for the rest of the year and beyond?
2021 Trucking Hiring and Retention Trends Remain Constant
If there has been one constant from 2020 through to now, it has been trucking demand. Job openings in the trucking industry remain high. Demand also remains high. The problem has been in meeting that demand. Not only did the pandemic force e-commerce into high gear, but it also increased the need for shipping in general. From essential supplies to medicines and vaccines – truckers delivered these goods.
All the while, the trucking employment remains a never-ending constant in our lives. Just when demand is at its highest, the trucking industry still struggles to find enough bodies in cabs. In fact, fleet size overall has declined in 2021. For the first half of the year, fleet sizes were down 6% for large motor carriers and 4.9% for small- to mid-size fleets.
Still, despite 2020 and 2021 being pandemic years, the overall truck driver turnover rate has remained fairly similar to what it was in 2019. And that number still came in too high. Motor carriers with more than $30 million in annual revenue came in at around 90% for 2020. In 2019, that number was 89%. Virtually unchanged.
Still, one could see the desperation to get goods where they needed to go in 2020. For the first 3 months of the year, truck driver turnover dropped to 85%. For smaller fleets and independent operators, turnover came in at 69% in 2020 and 72% in 2019. This year, it appears those numbers will continue to remain constant.
Questions Around the Truck Driver Shortage
The truck driver shortage is a controversial topic. Why? Because there is some debate around what the cause of the shortage is. In some cases, the question is whether there is even a shortage at all. The point is that there are enough people out there to fill the open jobs. The problem is ensuring the pay and benefits compensate people enough for doing the job.
The industry is also suffering from a COVID-19 unemployment benefit hangover. Numerous states are still offering generous benefits and a lot of stimuli have been handed out. Many people have yet to come back to work, especially when they are making almost as much or just as much as they were at work.
Truck driver shortages have been a nagging problem for a long time now. It is a topic we have revisited many times. For many truck drivers surveyed, competitive pay is the number one factor in attracting and retaining them. According to the most recent data from the Beareu of Labor Statistics, the states that have paid their truck drivers the most in 2021 are:
- Alaska
- Washington D.C.
- New York
- Wyoming
- California
Looking Beyond Truck Driver Pay
Whatever the cause for the truck driver shortage, fleets are taking steps to address it. Motor carriers began initiating pay raises and creating new incentives well before the pandemic. Whether it was through huge sign on bonuses or massive pay raises, fleets stepped up. According to the National Transportation Institute, in the first quarter of 2021 the average sign-on bonus for U.S. motor carriers was just over $3,200. Some companies have even gone so far as to offer up to $20,000 sign on bonuses.
Fleets have also redoubled their efforts to attract new generations, Millennials, women, and minorities to the job. Trucking is largely a male profession. As of the most recent full-year numbers, there were 3.36 million truck drivers employed in 2020. The good new is that while women still remain a minority in trucking, from 2010 to 2020, the percentage of women in trucking rose by nearly 5%.
Trucking companies are also looking inward to move the recruiting and retention numbers. Whether it be through enhanced safety programs, better coaching, or a renewed focus on company culture, smart fleet managers focus on their internal customers as much as their external.
A New Approach to Safety
Looking into other bits of trucking data over the past few years, one can also see a renewed focus on safety. Safety issues are more important to trucking fleets than ever. Safety programs have now been interwoven into every aspect of most trucking company’s operations. Whether it be through compliance scores, truck driver shortages, or insurance costs, safety impacts them all.
Safety data shows that – unsurprisingly – small fleets and owner-operators approach safety strategies differently than larger, legacy and enterprise operators. Larger fleets were 25% more likely to use advanced safety technologies and 18% more likely to utilize safety rewards and recognition programs.
Data from event recording companies show that we did see a slight increase in road violations from 2019 through 2021. The most common violations were for speed, incomplete stops at stop signs, and failure to stop at stop signs. There were some areas that got better, however, such as following distance and safe lane changes.
The First Full Year of New Regulations
An interesting bit of trucking data is related to the electronic logging device. It feels like the device has been around forever, but 2020 was just the first full year it was in use. It was also the first full year under the FMCSA’s updated hours of service guidelines to accommodate ELD usage. What does the data tell us about how the ELD has impacted safety in trucking?
Interestingly, since the ELD mandate has went into effect, hours of service violations have seen a steady decline. In 2020, 14-hour violations dropped to under 10,000 to 9,700. In 2017, hours of service violations clocked in at 36,600. 2020 also saw a dramatic drop in rest break violations, from 51,000 to 10,000.
2020 was also the first full year using the FMCSA’s Drug and Alcohol Clearinghouse. Fleets have managed to adapt well to the program, but it also puts a strain on the number of truck drivers available. The program certainly has seen a rise in out-of-service violations due to drug or alcohol use while behind the wheel of a big rig.
Trucking Conditions Are Favorable
Against this backdrop industry insiders discuss the state of the trucking sector. We are happy to report that trucking is flourishing. Despite the challenges of a truck driver shortage, messed up supply chains, and equipment order backlogs, trucking conditions are favorable. Still, after a year of record spot freight volumes and rates, there are signs that contract and spot rates are beginning to balance out. But what caused the massive uptick in trucking indicators?
Quite frankly, the pandemic’s effect on the purchasing behavior of American consumers changed the game for companies operating in the trucking and transportation sectors. Why? Because consumer purchasing increased more than 35% above the normal reading in the second and third quarters of 2020. Even more, purchasing has remained strong throughout 2021. At its peak the spot market peaked at 1.8 million loads in one day. Top rates hit nearly $3.20 per mile.
The trucking sector has also seen a flurry of mergers and acquisitions throughout 2020 and 2021. One example is Knight Swift with a move into the less-than-truckload sector with their acquisition of AAA Cooper.
The number of new for-hire trucking companies getting new authority to operate has climbed dramatically in the past 12 months. The industry is seeing a big shift with entrepreneurial truck drivers leaving jobs at big legacy fleets to start their own company as owner-operators. With spot rates so high and new technologies and systems to book loads quickly and easily at the proverbial touch of a button.
Higher Profits with an Eye on Infrastructure
Meanwhile, public for-hire truckload profit margins have grown dramatically in 2021. Overall, profits are up 2.2 percentage points on an annualized basis. The profits have been driven by strong freight growth and capacity in short supply. And although freight rates may be at or near peak, expect overall profit margins to remain very health well into 2022.
While this bodes well for trucking companies, from 2000 to 2019, travel on the Interstate system has risen by 26%. This represents triple the growth than what was planned for when lane expansion projects were completed. To keep up with ongoing demand, the U.S. Interstate Highway System will need to be rebuilt and expanded.
In the end, what does the data say about the overall health of the trucking sector? Good things. With the economic expansion continuing apace, trucking companies stand to benefit. Expect to see more new companies, higher profits, and a positive outlook for trucking, transportation, and supply chain companies.