Talk of a driver shortage in the U.S. trucking industry has started to heat up, a sign that a recovery in the freight economy is well under way.
The truck driver crunch is a recurring phenomenon that tends to disappear when the economy is on the slide and freight demand falls, but resurfaces as soon as volumes begin to pick up.
Truck drivers and driver/sales workers make up one of the largest occupations in the United States, holding 3.2 million jobs in 2008, according to the U.S. Bureau of Labor Statistics.
Demand for truck drivers tends to follow the demand for goods; as a recovering economy opens up more attractive job opportunities, carriers stand to face a severe crunch in driver supply when they begin to hire again.
Recent quarterly results from freight transportation companies such as United Parcel Service, CSX Corp., JB Hunt Transport Services and Landstar System reflect improving freight demand.
Also, new regulations such as the Federal Motor Carrier Safety Administration's Comprehensive Safety Analysis (CSA) 2010, to be introduced by federal regulators later this year, could affect the driver pool.
The initiative aims to keep a close eye on individual driving records and carriers' overall fleet records. A carrier with a poor safety record could be suspended.
"As the marketplace expands, even slowly as we are forecasting, there will be a driver shortage," Noel Perry, an analyst with logistics consultancy firm FTR Associates, said at an industry forum this month.
Perry sees a driver shortage of about 180,000 in 2010 and 500,000 in 2011 as the recovering economy increases demand and the new regulations crimp the supply.
"Just because the unemployment rate is high does not mean all those people can drive trucks," said Sterne, Agee & Leach analyst Jeff Kauffman.
He said the demand for freight grows at about 3 to 4 percent a year, while the number of truck drivers grows at less than 1 percent.
A driver shortage could possibly bite into truckers' margins and growth just as they begin to recover from the deepest and longest recession since the Great Depression.
In 2005, the trucking industry faced a shortage of 20,000 long-haul drivers -- those who move freight more than 550 miles -- due to an aging workforce and growing freight volumes, according to the American Trucking Association.
But with the recession reducing tonnage by more than 20 percent since 2008, the problem of shortage turned into one of surplus as trucking companies laid off employees and idled trucks to align capacity with lower demand.
Some labor economists have predicted a shortage of workers in certain occupations in the United States even as the country is dealing with a nearly 10 percent unemployment rate.
Barry Bluestone, dean of the School of Public Policy and Urban Affairs at Northeastern University, said there could be at least 5 million job vacancies in the United States in the next eight years but not enough workers, mainly because of the retirement of the baby boom generation.
"Unlike other occupations where people continue to work well into their 60s or 70s, truck drivers have a much more limited supply of labor," Bluestone said.
The baby boom generation will start to retire in large numbers in the next four to six years, with a smaller "baby bust" generation coming behind them, he said.
As the recovery takes hold, potential drivers find better and more rooted jobs in construction and manufacturing that they prefer to driving. Carriers will also find it difficult to replace the older generation that retires.
UPS, the world's largest package delivery service, recently said it expects 25,000 of its baby boomer drivers to retire over the next five years.
JB Hunt, one of the top truckload carriers in the United States, said the underlying demographics that existed prior to the recession still prevails today.
"While masked by a poor economy in recent years, these factors, combined with fewer new entrants coming through driving school/carrier training programs during the recession, will limit the ability of the industry to add capacity," JB Hunt spokesman Greg Smith told Reuters in an email.
Smith said the competition for experienced drivers is increasing, with more carriers currently hiring at rates not seen in the past 12 to 18 months.
"It is always difficult to find good, qualified drivers," said KeyBanc Capital Markets' Todd Fowler. "New regulations and the fact that trucking companies have not been recruiting just compound the problem in the short term."
Trucking companies diverted efforts away from recruitment and training in the last two to three years, leaving them with the need to ramp up aggressively as demand builds up.
Less-than-truckload carrier Saia Inc.'s CEO Rick O'Dell said he expects CSA 2010 to reduce the number of qualified drivers over time as safety records become more visible.
Other companies such as Knight Transportation, Werner Enterprises, Covenant Transport, USA Truck and Celadon have said in recent filings with the U.S. Securities and Exchange Commission that CSA 2010 could affect driver availability.
"The driver shortage issue is not going away. We only forget about it during recession," analyst Kauffman said.
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