Since we published our last State of the Market Report in February of 2018, capacity has remained constrained and freight transportation rates have remained high. In fact, that correlation was the #1 topic discussed at the Transportation Intermediaries Association (TIA) Capital Ideas Conference we attended in April. DC Velocity reported the "Capacity crisis (surprise!) hogs the spotlight at TIA annual conference," stating "A 'bad situation' seems like an apt description of the status quo. Some folks at the conference forecast truck rate hikes of 15 to 20 percent over the next 18 months. Moreover, they did so with a tone of acceptance and resignation that made one feel there was certainty behind the projections."
What's behind the hike? Read on.
A strong US economy continues to inspire strong manufacturing and construction sectors, increasing the demand for capacity, and therefore, increasing freight transportation rates. While trucking companies are scrambling to grow their fleets to keep up with this increase in demand, they remain inhibited by the ongoing, nationwide driver shortage and the ELD Mandate.
“We believe the real supply constraint in the industry is truck drivers,” reported research analyst, Brad Delco, to Transport Topics. According to the Annual Employment Screening Benchmark survey of 2017, experienced drivers from the baby boomer generation are retiring, causing the driver retirement rate to jump to 33 percent in 2017, up from 22 percent in 2014.
While many trucking companies have optimized recruiting practices and increased pay to attract new drivers (a decision reflected in shippers' freight transportation rates), only about 15 percent of new drivers last beyond their second year in the business and - despite optimized recruiting efforts - younger generations remain disinterested in truck driving as a career.
As long as trucking companies lack the drivers necessary to operate their expanding fleets, capacity will remain low and transportation rates will remain high.