Fourth Quarter Drop in Truck Driver Turnover Rate
According to the American Trucking Associations (ATA), large fleets saw the driver turnover rate fall to 88% for the fourth quarter, a drop of 1% from the previous quarter.
From a high of 136% in 2005, the driver turnover rate for large truckload fleets fell steadily to bottom out in 2010 at 39%. However, as the pool of experienced drivers further constricts due to an aging workforce coupled with an increase in demand as the economy rebounds, the turnover rate has jumped sharply in 2011 with a yearly average of 83%.
An additional reason, as cited by ATA Chief Economist Bob Costello, is the Federal Motor Carrier Safety Administration (FMCSA) program known as Compliance Safety Accountability (CSA).
According to Costello, "regulatory challenges related to hours-of-service and the government's CSA fleet oversight program," which links the behavior of drivers to the carrier safety score, consequently raising the requirements for drivers by carriers, "will continue to cause the driver market to tighten and the turnover rate to rise."
Increases in turnover rates are acutely felt by large fleet carriers as they compete in a small market to both recruit and retain drivers. The recruiting costs can range anywhere from $3000 to $8000 per driver.
For large trucking companies with at least 500 drivers, an 88% turnover rate at $8000 per recruited driver would cost over $3.5 million annually to retain a driver quota.
In starker terms, at this rate a company will lose and replace 440 of their 500 drivers in one year.
For the driver, however, higher recruitment costs and competition between trucking companies for experienced drivers is expected to translate into higher pay for 2012 as the cargo tonnage grows with a recovering economy. In fact, Noel Perry, the managing director of FTR Associates, an industry-leading consultancy firm in freight transportation forecasting, projects wage costs may increase by up to 30% by 2014.
The severe turnover crisis is not widespread in the trucking industry, though. After an increase of 10% in the third quarter, the turnover rate for smaller truckload firms whose annual revenue was less than $30 million fell 2% to 55% in the fourth quarter.
Moreover, less-than-truckload carriers saw a fourth-quarter drop in the driver turnover rate to 7% from 10% for the third quarter.
Despite the variances, the trucking industry has for some years experienced an abundance of available truck driving jobs as a driver shortage continues to plague the industry.
To put it into perspective, according to Jeff Kauffman, an analyst specializing in railroad and truck stocks for Sterne Agee & Leach Inc., “the truck driver population is growing at less than 1% a year,” while "freight’s growing at closer to 4%.”
Given a projected driver shortage of 111,000 by 2014, the growth disparity is sure to only compound the issue of high turnover despite an abundance of truck driving jobs.
For this reason, Costello states, "this reprieve, while surprising, is likely temporary,” when discussing the drop in driver turnover rates across the industry.
As the need for experienced drivers grows in tandem with an economy in recovery, the strain on the pool of available drivers will only increase, with the consequences rippling across multiple industries in the form of a delayed movement of goods, thereby slowing commerce and potentially hindering the economic recovery.