Turnover Rate to Increase in 2011, Economist Says

This story appears in the Jan. 3 print edition of Transport Topics.

Driver turnover is expected to rise this year after remaining near record lows for much of 2010, as the economy strengthens and new federal safety initiatives are implemented, a trucking official said.

“I believe driver turnover will rise [in 2011] primarily due to economic factors, but I also expect CSA to add to turnover as well,” Bob Costello, chief economist of American Trucking Associations, told Transport Topics.

ATA said driver turnover at large truckload fleets — those with $30 million or more in annual revenue — was unchanged in the third quarter of 2010 at 49%.

Small truckload fleets saw turnover dip slightly to 44% in the quarter, from 46% in the second quarter, ATA said.

Linehaul turnover for less-than-truckload fleets remained low at 11%, far better than the truckload carriers.

Among all truckload fleets, driver turnover has stayed below 50% for five straight quarters, far from the peak of 136% in 2005. Turnover dipped below 40% to an all-time low in the first quarter of 2010, then rose in the second quarter before leveling off in the latest report.

In addition to expectations of U.S. economic growth and trucking activity, Costello based his prediction on the projected effects of the Federal Motor Carrier Safety Administration’s Compliance Safety Accountability program.

A separate report, which showed a year-to-year drop in trucking bankruptcies, also spotlighted the CSA-related shift in industry attention to driver issues.

Avondale Partners analyst Donald Broughton’s quarterly bankruptcy research found that 330 companies with an average size of 33 trucks failed in third quarter. That was a drop from the 405 fleets with a combined total of 14,135 trucks that failed in the same quarter of 2009.

“Drivers are taking center stage as the single-largest determining factor in trucking,” Broughton said in his report. “The implementation of CSA 2010 and new hours-of-service regulations are serving to synthetically reduce even more capacity from the industry.”

“Raising the standards for driver safety will reduce the number of eligible drivers,” Boughton said. “Add to that the impact of reducing the number of hours each remaining driver will be able to drive, and we believe the potential exists to see total truckload capacity drop by 10% or more.”

During a 10-quarter period from the start of 2008 through  the second quarter last year, bankruptcies sucked nearly 13% of capacity from the nation’s trucking fleet. Capacity was further reduced as solvent fleets idled trucks.

When the improving economy caught up with the capacity reductions during 2010, the balance between supply and demand reached equilibrium, Broughton said in the report. As the year unfolded, the balance tipped in favor of fleets, which have been reporting higher rates and profits.

The consequences of an even-tighter market would be rate increases for carriers, eventual pay raises for drivers, as well as rising insurance costs to punish unsafe fleets, Broughton predicted.

“While it is still too early to say which [CSA-based] characteristics will make a driver completely uninsurable, the insurance industry will surely use the CSA ratings to further differentiate coverage levels,” the report said.

Meanwhile, American Trucking Associations’ report on the third quarter offered some positive news for drivers.

“After remaining relatively flat over the previous two quarters, truckload carriers reported the largest payroll increases since the third quarter of 2006,” ATA said.

In total, trucking employment rose 2.4% for smaller truckload fleets and 1.2% for larger ones.

The rise in employment reinforced the positive direction of ATA’s tonnage index, which has climbed 5.9% in the first 11 months of 2010 over the comparable year-earlier period.

The number of longhaul drivers rose 5.1% above the second quarter at fleets with revenue below $30 million and 1.3% at carriers with revenue above that threshold. Small fleets boosted their local driver corps by 7%.

The employment picture wasn’t as bright for office workers at small fleets, where the number of administrative office workers fell 4.2% and dispatchers and sales staff dropped 4%.

The picture was more stable at larger truckload fleets, where the size of those nondriver staffs changed less than 1%.