Large Truckload Turnover Worsens

Driver turnover among large and small truckload fleets is moving in opposite directions, at least for now. This was the finding of a new report that showed a 13 percentage-point increase among larger fleets and an 8 percentage-point drop among smaller carriers.

American Trucking Associations’ latest turnover statistics, covering the third quarter, showed an increase to 100% from 87% among fleets with $30 million or more in annual revenue, while smaller firms reduced churn to 68% from 76%.

ATA’s Chief Economist Bob Costello cautioned in comments to Transport Topics that the 32-point gap between the two should not be considered a sign of things to come.

“One quarter doesn’t make a trend,” Costello said. “Before I draw any conclusions, I’m curious to see if this divergence holds in the fourth quarter.”

The gap between the large and small fleets was the widest since the fourth quarter of 2011 and ran counter to the pattern in the last three quarters of 2014 and the first quarter of 2015, when large and small fleet turnover was nearly identical.

Costello, and others who analyze turnover, speculated that drivers had been leaving smaller fleets in droves to capitalize on double-digit pay increases made by larger carriers. Driver pay rose at a record pace in the third quarter of 2014, according to the National Transportation Institute.

For the larger fleets, the turnover figure for the third quarter of 2015 was the highest since the same period in 2012, when the reading was 104%. For smaller fleets, the 68% figure was the lowest churn rate since the fourth quarter of 2011, when the total was 55%.

Consultant Steve Prelipp also was not ready to pinpoint reasons behind the latest statistics.

“The same market forces are affecting both types of companies,” said Prelipp, a former Schneider National executive. “Freight is down, even though some in Washington think the economy is still good.”

He offered the possible explanation that many smaller fleets may have better communication with drivers, which could keep them on the job. He also suggested that larger carriers may not be giving drivers the miles they feel that they need, prompting them to look elsewhere.

Before that four-quarter period when the larger and smaller fleets were within 3 percentage points of each other, smaller fleets’ turnover on average was 16 percentage points lower than their larger counterparts between the start of 2012 and the second quarter of 2014. Over a longer period stretching back to 2000, the average spread was 26 percentage points.

“It’s clear that the third-quarter numbers aren’t unprecedented,” Costello said. At the peak of the driver shortage in 2005, when turnover at larger fleets hit the record of 136%, the gap was as large as 48 percentage points, he noted.

ATA also said less-than-truckload turnover fell to 10% from 13% in the year-earlier period.

Turnover trends in 2016 will be closely tied to freight demand.

“If freight picks up, I’d expect continued pressure on turnover because fleets will become even more aggressive in recruiting drivers,” Costello said. “If freight softens more, then we could see the opposite. The most likely outcome is soft freight early this year and improvement later as the [excess] inventory cycle comes to an end, which will put recruiting pressures on fleets in the second half of the year.”

Recent freight trends, measured by ATA’s tonnage index, have deteriorated markedly since September, with the tonnage index increasing just 1.2% year over year. However, the index remains within 0.2 percentage point of the all-time tonnage peak of 135.8 set in January 2015. ATA estimates tonnage growth in 2016 at 2% to 3%.

There were a few references over the past 10 days to turnover-related issues as publicly traded fleets disclosed quarterly earnings.

Patriot Transportation Holding Inc. said it reduced turnover to 65% from 79% by enhancing pay and intensifying recruiting efforts, increasing spending on those efforts by $589,000 for its fiscal first quarter.

J.B. Hunt Transport Services, No. 3 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada, referenced higher recruiting and retention costs throughout its trucking businesses, without specifying amounts.

No. 46 Convenant Transportation Group said it was having a more difficult time finding drivers as its percentage of unseated trucks rose to 5%.

Other fleets also said driver retention and recruiting continue to remain challenging, and expensive.

Studies, such as a recent one by consultant Stay Metrics of Indiana, have stressed the importance of driver engagement. That company’s study found drivers who don’t feel engaged with their carrier are nearly twice as likely to quit than those who do feel connected.