Date: January 14, 2021
Source: News Room, FTR Intel
A tight trucking market due to driver shortages could lead to higher recycling and disposal costs. According to freight market research firm FTR Intel, driver shortages exacerbated by the COVID-19 pandemic will lead to higher freight costs. This will impact the movement of wastes and recyclables.
The firm says the industry already lacked enough drivers before the pandemic. The trucking industry was already facing competition with construction, manufacturing, and local delivery positions. And increases in drug and alcohol use has removed some drivers from the road. Then came the pandemic which shuttered businesses sending workers home with some deciding not to return to work such that the overall labor participation rate (based on the entire population aged 16 or older) in the U.S. is down 2 percent compared with before the pandemic. There has also been a sharp reduction in new CDL drivers due to social distancing at schools, and especially on limits in issuing commercial learner's permits, by understaffed and stressed state agencies.
Volatility in Trucking Demand
Besides the shortage of drivers there are other stresses on trucking. Many businesses developed leaner operations during the pandemic to offset decreased revenue and expensive worker safety measures. Many now operating with a much lower inventory-to-sales ratio. This means there will likely be spikes in demand for trucking as the economy recovers and as companies need to replace critically low inventory accordingly. Demand for trucking will also increase as companies resume orders for capital goods deferred during the pandemic.
Trucking activity as measured by freight volume, while still down compared with pre-pandemic levels, has risen dramatically, even outpacing GDP growth, from the third quarter last year on. FTR does not anticipate the freight activity will recover fully until mid-2021 due to wider economic impacts from the pandemic on many business sectors (travel, entertainment, etc.). Active truck utilization, which is the share of trucks engaged in hauling freight, is "far above" February 2020 levels.
"While freight demand has not fully recovered, driver capacity is much tighter than it was," said Avery Vise, vice president of trucking for FTR, noting that payroll employment in the trucking industry is down 3% from February 2020. COVID-19 outbreaks at businesses will continue to disrupt the labor pool and may contribute to driver shortages, at least until vaccines are more widely available. With fewer available drivers comes less available trucking supply, leading to higher prices and potential disruptions in trucking availability, especially for long-haul operations.
Further industry uncertainty stems from the likelyhood of future industry regulation, including tighter fuel economy standards, emissions limits, etc. related to the ambitious climate change initiatives of the incoming Biden Administration. Jonathan Starks, chief intelligence officer for FTR said the Administration and Democrat lawmakers with a slim majority in the House and narrow control of the Senate might feel a sense of urgency to pass new regulations before the mid-term election cycle in two years.
To listen to FTR's webinar "Preparing for 2021," visit: https://freight.ftrintel.com/preparingfor2021.