New US regulations could leave industry short a million drivers by 2016: FTR Associates
July 11, 2013
BLOOMINGTON, Ind. -- An incoming regulatory tsunami could leave the American trucking industry in need of a million drivers by 2016, if all the new regulations currently being considered are implemented.
BLOOMINGTON, Ind. — An incoming regulatory tsunami could leave the American trucking industry in need of a million drivers by 2016, if all the new regulations currently being considered are implemented.
That startling assessment was made by Noel Perry, senior consultant with FTR Associates, during the industry forecaster’s State of Freight webinar Thursday.
The webinar focused predominantly on the impact of the new hours-of-service rules, which went into effect July 1. “The world is still spinning, that of course is the good news,” Jonathan Starks, director of transportation analysis, said when kicking off the discussion. “But that doesn’t mean things haven’t changed.”
He said weakening freight growth may have limited the impact of the new rules, which reduce the amount of driving truckers can legally do. Specifically, the new rules require drivers to take a half-hour break within the first eight hours, include two overnight periods in their 34-hour reset, and use the reset provision only once in any seven-day period.
While much emphasis has centered on the time lost by drivers taking a mandatory, half-hour break, Perry said that provision’s impact on productivity is debatable. Perry said while the new rule reduces the maximum daily working time by 6%, or half an hour, “We think the effect will be very small. Very few people have a bladder big enough to drive 11 consecutive hours; they usually stop more than once. The only difference is instead of stopping for a 15-minute break to go to the bathroom and get an ice cream cone, they’ll have to stop for the full half-hour. In an 11-hour period, I think they would stop to eat anyway, so this was a relatively small change.”
The bigger hit to productivity will come in the form of the new 34-hour reset rules, Perry contended. He said they have the potential reduce industry productivity by up to 15% if all drivers were currently maxing out their weekly driving time, which isn’t the case. Those facing the greatest loss of income will be fleets and drivers involved in long-haul transport where drivers are on the road for weeks at a time.
The July 1 rule changes effectively created a need for 60,000 more drivers in the US, Perry estimated, prompting the question: “Can they hire enough people or are we going to have a shortage?”
Unlike in previous economic upturns, Perry said US trucking fleets have been more reticent to add capacity. Fleets are buying about half the discretionary power units they were in 2004, he noted. This would suggest there could be some serious upward pressure on rates in the not-too-distant future.
Perry said the remainder of 2013 could bring pressure on capacity comparable to 2004, when rates spiked and remained high for more than a full year before abating.
“Once prices get that momentum, they tend to stay increased for a while even after the pressure goes away,” Perry said. “If we have a major pricing event at the end of 2013 or in 2014, I expect it to last for two years.”
The experts at FTR Associates had some tips for both truckers and shippers on how to deal with the coming labour crunch. For carriers, “This is the time to ramp up your recruiting efforts,” said Perry. “And you want to be particularly solicitous of your drivers. If you’re thinking about an increase in pay, this is probably the time. If you are thinking about the way you handle your drivers…this is the time to be particularly solicitous about time at home and other things that make for a happy workforce.”
As for shippers, Perry said they should prepare for the possibility of higher rates and be working to drive waste out of the system.
“The first thing is, you’ve got to make sure you have the budget flexibility in case rates do go up. You would hate to be losing shipments because you don’t have the right budget authorized. Two, be flexible about how you manage your docks to get truckers in and out quickly. This is not the time to send them away and ask them to come back in another four hours because they missed their appointment. They won’t accept loads to shippers that hold them at the docks,” Perry warned. “This is a great time to be thinking about cooperative programs with your core carriers to match, beforehand, the availability of equipment and loads.”
As for any hope the industry had that the new rules would be overturned by the courts, Perry said it’s looking like a pipe dream.
“In my opinion, if the court had intended to intervene in the case of hours-of-service, they most certainly would have done it before the rule was changed,” he said. “That is underscored by the fact that during oral arguments of that case, the judges were uniformly negative to the people who were (challenging the new rules).”
Still, while all the attention lately has focused on the costs of the new HoS rules, Perry reminded FTR subscribers that there are many more changes to come, which could collectively prove to be a much heavier anchor on productivity.
“Hours-of-service is a big change, but it’s only one of many,” he said. “We have to focus on what is happening in the marketplace immediately, but we can’t lose track of the fact that there’s a lot more to come from other regulatory changes.” He provided a list of more than 20 regulations that are at some point in the process of being introduced, and almost all would hamper the industry’s productivity (increased sizes and weights being the only exception).
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