The chief economist of the American Trucking Associations (ATA), Bob Costello, does not see a macro recession on the near-term horizon and is relatively sanguine about the American economy apart from trade policy.
That was the message Costello delivered recently at the McLeod Software User Conference at the Gaylord Rockies in Aurora, Colorado.
“The good news is that the U.S. is an island of growth that’s better than nearly every other industrialized economy,” Costello told McLeod employees, customers, and vendors at the conference. Gross domestic product is still at or slightly above the country’s long term trend of two percent growth, Costello explained.
Costello addressed specific trucking industry metrics like volume, rates, and capacity. Contract market fundamentals look “ok” to Costello; any 2019 ‘freight recession,’ he said, was due to the utter collapse of spot market volumes and rates. In 2018, spot markets loads grew by about 100 percent year-over-year, but in 2019 they fell by about 50 percent year-over-year.
Costello explained that ATA’s survey data shows that large fleets added just as much capacity as small fleets in the second half of 2018 and the first half of 2019, which put downward pressure on contract and spot rates.
Costello managed to transition from over-capacity to the ATA’s standard talking points on the driver shortage and said that if unchecked, the driver shortage could reach 160,000 drivers by 2028. The ‘driver shortage’ is largely based on the age and impending retirement of the average truck driver, who is about 54 years old.
But note that we have not seen updated average driver age numbers since the capacity additions of 2018 and 2019. It is hard to believe that the new drivers who entered the industry and contributed to the oversupply of the market would have been as old or older than the average truck driver already in the industry. It’s likely that just as the tight labor market eventually resulted in wage inflation and additional capacity, it also stabilized or reduced the age of the average driver.
More work needs to be conducted on the profile of the driver who enters the trucking industry during an inflationary freight cycle and how long they stay. We tend to assume that less experienced drivers have a harder time managing through a tough freight environment, and that the capacity might run-off in a ‘last in, first out’ pattern. But it’s unlikely that the newest drivers would own their own trucks or self-dispatch; instead, they’re probably company drivers. Additionally, it’s very possible that tough freight conditions could accelerate the retirement of the very oldest drivers who might have only stuck around for 2018 because of the favorable rate conditions that prevailed during that year.
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