BLOOMINGTON, Ind. — When the U.S. electronic logging device (ELD) mandate is fully implemented, trucking productivity could take a 2.5% hit, requiring the hiring of 60,000 additional drivers.
Such a scenario, outlined by industry forecaster FTR, would push truck utilization to about 100%, potentially driving up trucking rates. In a State of Freight Webinar called Preparing for the ELD future, FTR transportation economist Noel Perry expressed doubts that the industry, already struggling to find drivers, would be able to find 60,000 more in addition to the 300,000 it already needs to hire per quarter just to keep pace, especially since additional regulations in the works could further hit productivity and require the hiring of another 20,000 additional drivers.
“Can we hire 80,000 extra people in a single quarter? Normal sources of hiring demand about 300,000, and it will climb to about 375,000 in the first quarter of 2018. That’s a 26% increase. We believe we can’t, so there’s going to be pressure on capacity until they catch up, some time late in the year,” Perry said.
Such hiring spikes have been required before, most notably in 2004 and 2014, when capacity utilization reached nearly 100%. What happened then? Trucking prices spiked.
In 2004, spot market prices rose 15% and contract prices climbed 10%, thanks to a productivity hit incurred by new hours-of-service rules coupled with strong freight demand. In 2014, spot market prices rose 11% and contract rates 4%. One week in 2014 saw spot market prices rise 20% as capacity utilization was at its max.
Already, trucking capacity on the spot market is “scary tight,” Perry said, citing data from Truckstop.com and its loads-to-trucks ratio.
“A 20% increase in spot rates is not outside the realms of possibility,” Perry said, looking ahead to the impact the ELD mandate will have on pricing. “Our conservative numbers are, if anything, underreporting what’s beginning to show in the marketplace.”
But, predicting the impact of the ELD mandate on trucking productivity is an inexact science. Perry said an over-the-road truck that’s maximizing its hours could see a 5-8% productivity hit, while other trucks that don’t run a full 70 hours a week may not be affected. Perry also noted about 40% of U.S. fleets are currently already using ELDs and will have worked through any hit to their productivity. And of course, there’s no chart that shows how many fleets are running paper logs and egregiously violating hours-of-service regulations, and how many of them will be unable to continue operating in an ELD environment.
But all those factors taken into account, Perry said the maximum effect of the regulation will occur sometime in late 2018, “assuming reasonable enforcement” of the law.
“The effect at the peak, we think will be 2.5-2.7%, which doesn’t seem like much, but when you consider 3-3.5 million trucks and you take 2.5% of that, it equals somewhere around 60,000-70,000 trucks using crude math.”
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