ORLANDO, Fla. – Demand for trucking services in the U.S. has increased, and in a more sustainable way than it has in the past, setting the stage for a strong 2018.

That was the feel-good consensus expressed at the popular All Eyes on the Economy session at the American Trucking Associations’ annual Management Conference & Exhibition. Bob Costello, the ATA’s chief economist, noted truckload load volumes have increased across dry van, flatbed, reefer, and tank truck segments. Over the last five months, year-over-year load growth has averaged 4%, well above the average 2.6% growth seen from 2010 to 2014.

Truckload loads are up 2.5% this year, compared to a 0.1% increase last year.

The LTL segment in the U.S. has seen tonnage increase 1.1% this year, after dropping 0.7% in 2016.

“I think (demand) has picked up, and in a more sustainable way than in some of these prior years,” said Derek Leathers, president and CEO of Werner Enterprises.

In past upswings, Costello noted trucking was still taking market share from rail, which is no longer the case, resulting in less impressive growth. But he agreed with Leathers that this slower growth is more sustainable. This also means there’s less likelihood of a recession, Costello noted.

“This is going to be now the second longest expansion we’ve ever had,” he said. “But we are not growing that fast. We are growing at 2-3%, that’s nothing. There’s not anything on the horizon we’re worried about at this point. Certainly, it can happen, but we’re not growing fast enough – it’s anemic growth.”

Stronger freight demand coupled with tightening capacity should benefit trucking providers. Costello said large truckload fleets in the U.S. reduced their tractor populations by 5.8% in 2017.

“At the time demand is picking up, capacity is not picking up,” Costello said.

This could already be contributing to improving pricing. Costello said the U.S. Bank Trucking Shipper Spend Index in the third quarter showed an 8.3% increase in pricing – the best quarter-over-quarter gain since Q4 2014.

“Freight is getting better, tractor growth is more limited, the ELD rule is coming, and if things don’t change, I’m looking at 2018 as a pretty good year,” Costello said.

Leathers agreed.

“The reality is, this capacity is going to be very difficult to come back in at a rapid rate,” he said, citing the driver shortage, and depressed used truck pricing, which makes it difficult for fleets to sell used equipment and buy new trucks.

Costello noted fleets are seeing fuel costs decrease, but labor costs rising as companies offer more attractive pay packages to lure drivers.

“As an industry, we all have to do our part,” Leathers said of improving driver pay. “These men and women out there are serving our nation every day, and they have to be paid to do so. I think the industry is doing a good job getting pay where it needs to be. To do that comes at a price. Some of that is offset by more fuel-efficient trucks and better mpg, and our better ability to manage costs.”

But operating costs for carriers, explained Costello, have risen about 25% over five years if you remove lower fuel costs from the equation.

Despite improving driver pay, the shortage of qualified drivers will continue to be a major issue facing the industry. In fact, an American Trucking Research Institute (ATRI) survey published at the event revealed it’s the top concern among trucking executives for the year ahead.

Truckload driver turnover rates in the U.S. during the second quarter were at 90%. Costello said the U.S. trucking industry is short 50,000 drivers, a new all-time high. The ATA predicts that if nothing changes, the industry will be short 174,000 drivers by 2026.

“If we get there, it’s going to be a problem,” he said.

“The real issue we’re all faced with, is the quality driver shortage,” said Leathers. “Our ability to go find drivers in a tight driver market that meet the criteria and expectations we all have.”

Leathers said there’s more visibility into a driver’s past transgressions, making fewer candidates suitable to hire. This year, Werner hired only 2.7% of its applicants.

“That’s an issue,” Leathers said. “There’s a larger population than ever before that’s not meeting industry criteria and we have to do a better job of reaching out to better folks and offering better training.”

If the driver shortage reaches 174,000 by 2026, noted Costello, “it will start to impact supply chains. It may be the day you get to the grocery store and instead of 10 different types of apples, you have seven, because they just couldn’t get there.”

The U.S. trucking industry must hire nearly 900,000 new drivers over the next decade. It won’t be easy, since 57% of the workforce is 45 years of age or older, and only 4.4% of the workforce is from the 20- to 24-year-old age bracket. Leathers said that to attract more young people, he’d like to see carriers allowed to hire younger drivers through some sort of graduated licensing process where they get trained on the job.

“There is no one solution to the driver shortage,” said Costello.

Another hot topic during the discussion was NAFTA, an issue Costello said ATA is “working very diligently on.”

He noted trucks haul 71% of the value of surface trade between the U.S. and Canada. Truck-transported trade since 1995 has increased nearly 76% between the two countries. There are more than 12 million commercial truck crossings at the northern and southern U.S. borders each year.

“Trucking and trade are synonymous,” Costello said. “It shows how important NAFTA is to our industry.”

Costello also noted the U.S. actually added manufacturing jobs after NAFTA was implemented – the big decline didn’t come until China joined the World Trade Organization in 2000. “I don’t think that’s a coincidence,” he said.

Every year, more than 46,000 U.S. trucking jobs are due to trade with Canada and Mexico.

“The numbers speak for themselves,” said Leathers, whose company hauls product into both Canada and Mexico. But he said a reworking of NAFTA could be beneficial.

“The reality is, the NAFTA agreement is over 20 years old,” he said. “There are things in the NAFTA agreement that need to be improved upon. I’m of the mindset that as long as we’re looking to remodel the house and not do a teardown, then this process has some good promise…I don’t think we should apologize for reviewing the agreement, nor do I believe the agreement is ready to be thrown in the fireplace.”

Costello said that if NAFTA is terminated, the immediate effect will be increased tariffs. The longer-term risk would be more plants being relocated to Asia, reducing the cross-border truck trips that are needed today to feed plants within North America.

“It would give (Asia) a competitive advantage and we wouldn’t have the intermediate flow of goods back and forth across the border,” Costello explained.