Factors That Affect Drivers Shortage in the US

Drivers shortage in America is starting to resurface once again. Is there really a shortage or is it just a myth? If there is real shortage threatening the trucking industry today, what are the factors that affect this recurring phenomenon?

Improving Economy

It seems that during the downside of the economy and as the freight demand plummets the so called truck driver crunch is not an issue, but as the economy recovers and freight volumes begin to soar, the driver shortage is always the much talked about problem of the trucking industry.

According to the U.S. Bureau of Labor Statistics, truck drivers and driver/sales employees consist one of the largest occupations in the United States, holding 3.2 million jobs in 2008.

Whenever the demand for commodities rises, demand for truck drivers follow. Recovering economy opens the door for more attractive job opportunities, trucking companies encounters a heavy shortage in driver supply when they begin to hire once more.

The recent quarterly results from freight transportation companies such as United Parcel Service (UPS.N), JB Hunt Transport Services (JBHT.O), Landstar System (LSTR.O), and CSX Corp (CSX.N) show improving freight demand.

CSA 2010

Another factor that is threatening affect driver pool is the the Federal Motor Carrier Safety Administration's Comprehensive Safety Analysis (CSA) 2010, which will be introduced by federal regulators later this year. The initiative’s goal is to scrutinize individual driving records and carriers’ overall fleet records. A trucking company with an awful safety record could be suspended.

Noel Perry, an analyst with logistics consultancy firm FTR Associates said at an industry forum this month. "As the marketplace expands, even slowly as we are forecasting, there will be a driver shortage." Perry forecasts a driver shortage of approximately 180,000 in 2010 and 500,000 in 2011 as the recovering economy increases demand and the new regulations crimp the supply.

Retiring Baby Boomers

Just as they begin to come out from the ashes of the deepest and longest recession since the Great Depression, a driver shortage could possibly sink its fangs into truckers’ margins and growth.

According to the American Trucking Association, the freight industry faced a shortage of 20,000 long-haul drivers (those who hauls more than 550 miles) due to aging workforce and increasing freight volumes in 2005. The problem of driver shortage has turned into driver surplus when the recession hits in 2008, though. The recession drastically reduced freight volumes by more than 20%. With lower demand, freight companies laid off drivers.

Some labor economists have forecasted a shortage of workers in certain jobs in the United States even as the country is wrestling with a nearly 10 percent unemployment rate. According to Barry Bluestone, dean of the School of Public Policy and Urban Affairs at Northeastern University, there could be at least 5 million job vacancies in the United States in the next eight years but not enough workers, for the main reason that the baby boomers’ generation, are due for retirement.

"Just because the unemployment rate is high does not mean all those people can drive trucks," according to Sterne, Agee, & Leach analyst, Jeff Kauffman. He said the demand for freight soars at about 3 to 4 percent a year, while the number of truck drivers creeps up at less than 1 percent.

Bluestone also clarifies that truck drivers have a much more limited supply of labor, unlike other jobs where employees continue to work well into their 60s or 70s. The baby boomers will start retiring in huge numbers in the next four to six years and they have a smaller “baby bust” generation following behind them.

Better Pay, Better Working Conditions

Some say that there is no drivers shortage. They are just over worked and under compensated. They don't see their families as much as they want, and their not really happy with their take home pay and their job security. This is why laid off drivers during the recession are now looking for a better job other than long-haul trucking.

As economic recovery takes hold, potential drivers find better and more rooted work opportunities in the field of construction and manufacturing that they prefer to driving. Carriers will find it hard to replenish the older generation that retires. Over the next five years, UPS, the world's largest package delivery service, currently reveals that it is expecting 25,000 of its baby boomer drivers to leave work and embrace their retirement. One of the top truckload carriers in the United States, JB Hunt, said the underlying demographics that existed prior to the recession still prevail today.

Greg Smith, JB Hunt spokesman, told Reuters in an email: "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."

Trucking companies turned its 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. According to Smith there is a growing competition over experienced drivers. More carriers are 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."

Analyst Kauffman explained, "The driver shortage issue is not going away. We only forget about it during recession."