After the profound impact of COVID-19 on the driver market earlier this year, the trucking industry is making bounds towards recovering faster than the rest of the economy.
During the second quarter, the annual turnover rate of truck carriers fell by double-digit percentage points. The impact of this, due to the enduring pandemic, could be felt across the industry at large and small carriers alike.
In the second quarter, the turnover rate at truckload carriers with more than $30 million in annual revenue declined by 12 percentage points to 82%, the lowest level since the end of 2018. The rate at smaller truckload carriers declined by 10 percentage points to 60%, the lowest level since the fourth quarter of 2011.
The annualized turnover rate at less-than-truckload carriers was unchanged at 12% during the second quarter.
“The second quarter was a tumultuous one for trucking, and the broader economy, as restrictions imposed to slow the spread of the COVID-19 had significant impacts on the country,” said American Trucking Associations Chief Economist, Bob Costello, in a press release. “The coronavirus had a profound impact on the driver market – particularly in the first part of the second quarter. But by the end of the quarter, we had begun to see the market tighten again as various restrictions began to be lifted.”
“After steep drops early, the driver market began to normalize toward the end of the quarter,” Costello said. “As the economy continues to recover, we should see the market for drivers continue to tighten going forward.”
According to ACT Research’s recently released Transportation Digest, the U.S economy is recovering from the pandemic in a ‘K-shaped’ pattern. The freight economy is experiencing a ‘V-shaped’ recovery pattern, as opposed to other segments that are experiencing an ‘L-shaped’ pattern.
“Over-the-road carriers are enjoying a period of volume growth and pricing power that would have been considered shocking, though welcomed, from an April 2020 vantage point.” said Kenny Vieth, ACT’s President and Senior Analyst., “The underpinnings for this strength include the lighter impact of COVID-19 on goods-producing sectors, which are truck intensive, as compared to the devastation still being felt by services sectors, which are not trucking intensive. In addition, the consumer spending substitution away from experiences and toward goods, pent-up demand for inventory restocking, a hot housing market, low interest rates and low energy prices are supporting freight.”
This ‘V-shaped’ trajectory puts the industry on a positive path towards recovery.
While demand is strong in some segments, others are not experiencing the same type of surge in demand. Costello describes this in the ATA’s advanced seasonally adjusted For-Hire Truck Tonnage Index, which fell 5.6% in August after decreasing 1.4% in July.
“The August softness suggests that freight is very uneven in the trucking industry,” Costello said. “The trucking sectors that haul for the industrial and energy industries are not seeing the surge in freight like the consumer side of the economy. The industry loads tend to be heavier, so they count more in a tonnage calculation than most consumer-related loads. Fleets hauling for retailers are generally seeing strong freight volumes. Carriers hauling heavier industrial products generally saw softer volumes in August.”
Despite the August softness, the industry as a whole is expected to continue to recover in the coming months.