In the US, trucks move roughly 72.2% of the nation’s freight by weight, representing roughly 11 billion tons of freight (primary shipments only) in 2021. According to the ATA, 38.9 million registered trucks traveled a total of 302 billion miles in 2020 and the number of for-hire carriers on file with the Federal Motor Carrier Safety Administration totaled just over 1.1 million as of June 2022.
A vital part of the nation’s infrastructure, these trucks haul food, oil and gas, consumer products, retail goods and myriad other types of freight as it moves from origin to destination. When e-commerce orders picked up during the early stages of the global pandemic, demand for trucking skyrocketed right at a time when COVID-19 shutdowns and a preexisting driver shortage were already impacting available capacity and rates.
Joe Jaska, EVP Head of Land Region Americas, DB Schenker commented, “And while the disruptions have since retreated—as in, there are no longer hundreds of container ships sitting off the California coast, waiting for a space in port to be able to unload their goods onto trucks or intermodal rail—issues like the driver shortage continue to impact the land transport sector. In fact there are three trends we see that are important in 2023”.
Addressing the Persistent Driver Shortage
The driver shortage isn’t a new problem. As far back as 2005 the American Trucking Associations (ATA) was documenting a shortfall that the Great Recession erased but that quickly resurfaced as the national economy recovered. By 2018, ATA was reporting a shortage of 60,800 drivers industrywide. That number has since increased to 80,000 and may reach 160,000 by 2030, according to the ATA.
“Since we last released an estimate of the shortage, there has been tremendous pressure on the driver pool,” ATA’s Chief Economist Bob Costello said in a press release. “Increased demand for freight, pandemic-related challenges from early retirements, closed driving schools and DMVs and other pressures are really pushing up demand for drivers and subsequently the shortage.”
To keep up with demand over the next decade, the ATA says trucking will need to recruit nearly one million new drivers. This will allow the industry to “close the gap” caused by demand for freight, projected retirements and other issues.
“Because there are a number of factors driving the shortage, we have to take a number of different approaches,” Costello said. “The industry is raising pay at five times the historic average, but this isn’t just a pay issue. We have an aging workforce, a workforce that is overwhelmingly male and finding ways to address those issues is key to narrowing the shortage.”
Autonomous Trucking Comes into Focus
With the national labor shortage also expected to continue into 2023, expect to see companies getting more creative in their driver recruitment, training and retention strategies. This may include hiring more non-traditional drivers, coming up with more flexible work arrangements for them and even testing out semi-autonomous trucks on certain routes.
For example, PlusDrive is one of several commercially-available autonomous trucking solutions already in use. Truck drivers stay in the cabin to oversee the system, but don’t have to actively drive the vehicle. Instead, they can turn on PlusDrive to automatically drive the truck on highways in all traffic conditions, including staying centered in the lane, changing lanes and handling stop-and-go traffic, according to FreightWaves.
“I’m an admitted cynic and was blown away by the ride-along experience,” ACT Research’s Ann Rundle told FreightWaves. “It was so seamless. If I wasn’t watching the screen that indicated ‘engaged’ I might have wondered if PlusDrive was indeed still doing the driving.”
Rates, Fees & Capacity Trends
In October, the Wall Street Journal reported that the trucking spot market business on the West Coast had fallen to its lowest level since May 2020 and that demand in the Southeast was also waning. “The falling demand is sending freight rates into an unseasonable decline,” WSJ adds, noting that the average spot rate for truckload vans fell from August to September for the first time since 2015.
“The freight industry is slowing in general, but it’s not so much falling off a cliff as returning to earth from the soaring heights of a hot cargo market that peaked in the fourth quarter last year,” the Washington Post states in a recent trucking industry roundup article. “Having a crystal ball is most important now because how cargo demand holds up over the next couple of months will determine the leverage shippers will have to push for lower rates as they negotiate freight contracts for 2023.”
Because the nation’s warehouses are full right at a time when consumer demand is waning, the publication predicted in October that trucking companies wouldn’t have much of a “peak” season in 2022. And while trucking spot market rates are declining, the Washington Post says the contract market is holding steady and even rising. “Cargo tonnage in this market rose 5.5% in September from a year ago, reaching the highest level since August 2019,” it says, “and contract rates have risen 15% from a year earlier.”
The Crystal Ball
Jaska summarized, “Looking ahead, the air of economic uncertainty, inflation rates and potential for more interest rates hikes by the Federal Reserve could all impact consumer spending and, ultimately the national trucking industry as 2023 progresses. This could spell good news for shippers that would benefit from the freed-up capacity and lower rates that could follow”.
More than two years after the recovery from the COVID-19 recession began, JOC’s William Cassidy calls the trucking market as “volatile and unpredictable” as ever. “It’s no longer ‘crazy town,’ as it was called last year, but it’s neither sane nor sober,” he writes. “More than ever before, the trucking outlook depends on whether you’re a shipper, a small or large carrier or an intermediary.”