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JOC Guide to Trucking, August 2019

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August 2019 | The Journal of Commerce 19 2019 JOC Guide to Trucking SHIPPERS MAY HAVE no trouble finding a truck this year, but trucking com- panies still say they have a hard time finding drivers. The truck driver shortage has diminished in 2019, but not disap- peared, and threatens to return with a vengeance when the US economy and freight demand strengthen, according to Bob Costello, chief economist at the American Trucking Associations (ATA). "We do say that the shortage will improve slightly this year, and not get worse, but that's for the wrong reasons," he said at a July press confer- ence launching the ATA's Truck Driver Shortage Analysis 2019. "Most of it has to do with the slowdown of freight. We have a temporary reprieve." Last year, the shortage hit a peak of 60,800 drivers, according to the ATA, as freight demand soared in the first half and the electronic logging device (ELD) mandate cut into truck- ing productivity. The gap between the number of drivers needed and supply grew nearly 20 percent, it said. But that was then. This year, truck tonnage and shipment vol- umes have slipped, while truck registrations have risen by double digit percentages. New trucks carriers ordered last year are hitting the road, -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 4Q 2008 2Q 2009 4Q 2009 2Q 2010 4Q 2010 2Q 2011 4Q 2011 2Q 2012 4Q 2012 2Q 2013 4Q 2013 2Q 2014 4Q 2014 2Q 2015 4Q 2015 2Q 2016 4Q 2016 2Q 2017 4Q 2017 2Q 2018 4Q 2018 2Q 2019 Sequential percentage change Annualized per centage change Sequential, annual TCI changes align as carriers cut capacity Source: Company reports, JOC analysis © 2019 IHS Markit Annualized vs. sequential percentage change in quarterly JOC Truckload Capacity Index Percentage change the TCI shed thousands of trucks, bringing the index to its nadir of 73.8 in the fourth quarter of 2013. The baseline for the index, based on truck counts, is the fourth quarter of 2006. After more than 10 years of US economic recovery, the truckload carriers represented by the index still haven't rebuilt their fleet capacity to the level they offered before the 2008-2009 recession. Their combined tractor fleet remains 13.3 percent below its 2006 level. During the 2016-2017 slowdown, the index reading dropped only 2 per - centage points, hitting its most recent low point of 78.2 in the fourth quarter of 2016. The second-quarter 2019 reading is 3.9 points higher than the year-earlier index. Large carriers are unlikely to reverse that gain by much. For one, operators don't want to give up truck drivers after purchasing new vehicles in large numbers last year to attract them. Carriers also tend to reassign equipment within their businesses, shifting trucks from over-the-road long-haul duties to dedicated divisions, for example. The catalyst Beacom is looking for is a more certain US economic outlook and more freight flowing out of ware- houses, where inventories remain high. Demand is more likely to climb to meet supply than capacity cuts are to bring the truckload market back into balance. l email: twitter: @willbcassidy the market." Capacity appears to be "flattish, Beacom added. The crux of the problem is the sheer volume of capacity that entered the market last year. Throughout 2018, the JOC TCI climbed 7.1 per- centage points as the carriers in the index group increased their actual tractor counts by a combined 8.9 per- cent to more than 23,000. Last year's 7.1-point jump in the index was the sharpest acceleration for the truckload capacity barometer at any time since the 2008-2009 recession. From the first quarter of 2014 through the first quarter of 2016, the index rose 6.1 percentage points, from 73.9 to 80. During the slow freight economy of 2016 and early 2017, the index remained relatively flat until it accel - erated 3.3 percent in the second quar- ter of 2018, as a wave of new trucks ordered in the second half of 2017 began to arrive. The index peaked in this year's first quarter. Tapping the brakes The carriers as a group are now slowing supply-side growth, albeit gently. In the first quarter, the companies, which generated more than $8 billion in combined revenue last year, increased their combined tractor count 9.1 percent year over year. In the second quarter, that rate slowed to 4.6 percent. The last major shakeout in capa- city occurred from 2006 to 2013, when the large carriers tracked by Driver deficit US truckload carriers still short on drivers By William B. Cassidy

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