Government data suggests that driver hiring has screeched to a halt. If the end of generous unemployment benefits doesn’t work, what will? Perhaps the market's challenge isn't really the total number of drivers anyway.
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Through May, payroll employment in for-hire trucking remains at 45,100 jobs, or 3.0%, below the pre-pandemic month of February 2020, seasonally adjusted. During the first five months of the year, trucking has added a net of just 800 payroll jobs, according to Bureau of Labor Statistics data.
Stagnant payrolls in 2021 followed the fourth quarter of 2020 when trucking added nearly 29,000 payroll jobs. Perhaps this abrupt shift would make some sense if it appeared that we didn’t need more drivers, but the data seems to belie that theory.
Throughout the first five month of 2021, spot market rates were rising, even setting records week after week starting in March. Spot volume basically held steady at near-record levels. Only in June have we seen any indication – and not clear indication at that – the spot market might be beginning to ease.
Not all of the 45,100 payroll jobs still missing from the trucking industry are truck drivers, of course. However, based on drivers’ share of total workers and the fact that drivers are more readily added and
subtracted from the work force than most other positions, we can presume most of these workers
are drivers.
The big question, of course, is: why aren’t drivers returning? One possible answer is that the question
itself is flawed. Perhaps the principal issue is not a lack of drivers but rather poor productivity for the
drivers we do have.
What if the issue isn’t the number of drivers?
The fundamental premise in our analysis is that the BLS data on payroll jobs is a rough but reliable
indicator of driver capacity. Owner-operators are not payroll employees, and they make up a sizeable
share of drivers. Our analysis in the past has been that the population of owner-operators tends to
move in concert with payroll employment.
However, never before have we seen a surge in new entry like the one we have seen since the
contraction. From July 2020 through May 2021, the Federal Motor Carrier Safety Administration
(FMCSA) authorized more than 79,000 new trucking firms. The largest year for new entry previously was 2018 when FMCSA authorized nearly 44,000 carriers. FMCSA has authorized more than 41,000
trucking firms in just the first five months of 2021.
As we discussed in the March report, the impact of this surge on capacity is unclear. However, we do
know that the vast majority of these new carriers are very small – just one or two trucks. Most operations that small are not reflected in the BLS payroll employment data, which generally captures firms that participate in unemployment insurance programs. This has always been a blind spot in the
monthly data as neither very small independent owner-operators nor small leased owner-operators
paid as independent contractors are visible in that data. However, the scope of new entry has never
been so great.
According to FMCSA registration data, new entrants since July of last year represent more than
167,000 truck drivers. Although we do not know where these drivers were previously, we presume
most were leased owner-operators who obtained their own authority. The number of drivers involved is so huge that even if a small share previously were employee drivers, the impact on payroll employment
could be significant without any effect in the overall number of drivers in the market. Indeed, if 27% of
the drivers working for these new carriers previously were employee drivers – unlikely but not impossible– that’s the entire 45,100-job deficit in the BLS data.
As leased owner-operators have gotten their own authority, the impact on total capacity would be
neutral unless trucking companies were able to replace them with new leased owner-operators. In
the current market, replacing leased operations would be difficult, but surely some amount of the
capacity lost to new authority has been replaced. To the extent that has happened, driver capacity is
higher than payroll job data implies.
For argument’s sake, let’s assume that driver capacity is significantly higher than what BLS figures suggest. If so, why would we be seeing an extreme spot market and aggressive pay offers from
larger trucking companies? Three conditions in today’s economy could explain this seeming contradiction:
- Wild swings in consumer demand due to the timing of large rounds of stimulus;
- Severe supply chain disruptions due to factors like port congestion, hyper-lean inventories, and shortages of components such as semiconductors;
- A structural change in how truck freight capacity is organizing itself. We discussed this final point in the November 2020 edition of State of Freight INSIGHTS, which addressed legal, competitive, and technological factors that could be supporting new entry.
In essence, this scenario holds that the current stress in the truck freight market is at least as much
about productivity as capacity. Sufficient driver capacity might exist, but capacity is either in places
it wasn’t before or demand is in places other than where it has been. Even if the market might have
enough drivers, individual carriers might not have enough drivers to meet their customers’ needs.
If this scenario is reality, we could perceive that the driver situation improves dramatically once we start
seeing stability in freight demand and the supply chain and when the market better adjusts to
capacity shifting from legacy truckload carriers to brokers, third-party logistics firms, and the so-called
“tech-enabled startups.”
As of now, this scenario certainly is not our base assumption. The entire economy is struggling to fill open jobs as evidenced by record months for job openings in March and April. We likely are still
missing a significant number of drivers.
