Looking at the tonnage numbers recently posted by the American Trucking Associations (ATA), one would be forgiven for thinking that now would be a pretty good time for carriers to go on a hiring spree.
According to the ATA’s for-hire truck tonnage index, freight volumes increased 2.9% in January after jumping a (revised) 2.4% in December, with tonnage overall “surging,” in the trade group’s words, at least 2.4% every month since November, gaining a total of 9.1% over that period.
“The trucking industry started 2013 with a bang, reflected in the best January tonnage report in five years,” noted Bob Costello (at right), ATA’s chief economist said, adding that for all of 2012, tonnage was up 2.3%, compared to a 5.8% increase in 2011.
On the surface, at least, it looks as though fleets might need to acquire more trucks and hire more drivers to haul all this extra freight. Then again, maybe we’re not seeing the whole picture here – and indeed, ATA’s Costello emphasized a note of caution within his analysis.
“While I believe that the overall economy will be sluggish in the first quarter, trucking likely benefited in January from an inventory destocking that transpired late last year, thus boosting volumes more than normal early this year as businesses replenish those lean inventories,” he said.
Thus, perhaps, the recent freight spike may be more a one-time occurrence than sustained trend.
Then there are the also higher costs to consider when thoughts of expansion crop up – costs in no small matter associated with the many major regulatory changes visited upon the industry over the last decade.
Dick Witcher (at left), chairman of the American Truck Dealers (ATD) and CEO of Minuteman Trucks in Walpole, MA, touched on that very point during his acceptance speech at the organization’s annual meeting this month in Florida.
“Far too many good intentions have essentially backfired and hurt those that the regulation was originally designed to help,” he explained, pointing in particular to the well-known truck exhaust emission regulations imposed by the Environmental Protection Agency (EPA).
Intended to help clean the air and increase fuel mileage, those rules increased the sticker price of a new Class 8 truck by $10,000 to $25,000 due to cost of complying with the regulation, Witcher said.
“The unintended consequence was that truck owners held on to their trucks longer which resulted in decreasing sales and lost jobs, and trucks on the road did not have the safety features, cleaner exhaust and latest fuel economy technology that the new models had,” he added. “The intent of the regulation was to help make their air cleaner but in many ways the exact opposite happened as owners couldn’t afford to buy the newer, safer and cleaner trucks.”
Higher-priced equipment also makes expansion efforts more costly – and that’s before the changes to driver hours of services (HOS) rules or the impact of the new Compliance Safety Accountability (CSA) program set up by the Federal Motor Carrier Safety Administration (FMCSA) are considered.
TL carrier Werner Enterprises addressed some of those issues – as well as the impact of more costly equipment – in its year-end earnings report.
“Capacity in our industry remains constrained by economic, safety and regulatory factors,” the carrier said. “From 2007 to 2010, the number of new Class 8 trucks built was well below historical replacement levels for our industry. This led to the oldest average industry truck age in 40 years.”
Carriers were compelled to begin upgrading their aging truck fleets starting in 2011, which led to increased replacement purchases of new and later-model used trucks over the last two years, but Werner believes new truck orders have and will keep slowing as current freight rate relief is not keeping pace with the increased costs and capital requirements for new and much more expensive EPA-compliant trucks.
“The significantly higher costs of new equipment and related diesel exhaust fluid will not be recovered through a single year rate review cycle,” the company noted.
Werner also noted that the FMCSA’s reforms to driver HOS rules – which go into effect July 1 – will result in a modest decrease in truck productivity.
John Larkin (at left), managing director of Wall Street firm Stifel Nicolaus’ transportation and logistics research group, took a much dimmer view of the situation based on the intelligence he gleaned from his company’s fourth annual Transportation & Logistics Conference last month.
“Few carriers are adding any incremental equipment, even as they continue the process of renewing their still relatively old fleets … and capacity continues to be defined by the availability (or lack thereof) of CSA compliant drivers,” he said.
“Some carriers have spooled up their driver training efforts in order to bring new faces into the industry. Still many carriers prefer to hire only experienced drivers which can make it difficult for carriers with training programs to hold on to the drivers they train,” Larkin pointed out.
Looking into 2013, the driver situation could take a turn for the worse as the reduced productivity embedded in the revised HOS rules begins to be felt in July, he emphasized – noting that, going forward, mandatory installation of electronic on-board recorders (EOBRs), more stringent medical exams for drivers, speed limiters on trucks, revised drug testing methodologies, etc., will all either shrink the driver pool or reduce the productivity of those in the pool.
Add in broader concerns about the economic direction of the country (is it truly recovering or preparing to stall?) and uncertainty over how politics might increase economic uncertainty further and it’s no wonder that many businesses – let alone trucking – may continue to hold off on hiring new workers.
For example, take a look at some of the contradictory findings from the 2013 Workforce Trends Study compiled by global consulting firm Yoh.
Yoh’s survey – which polled 150 human resource professionals working for companies generating at least $750 million or more in annual revenue and employing 1,500 or more workers – found that 80% of them expect their 2013 hiring will meet or exceed their rate of hiring in 2012.
Also, of those companies planning to accelerate hiring this year, 83% expect to increase staffing levels by at least 3%, as “demand for talent” exists at nearly every level, especially in information technology, sales, and operations and production.
Yet Yoh’s survey also found that optimism is being dampened by lingering concerns over a variety of economic and political headwinds, as 44% of the respondents say they are not expecting to increase hiring in 2013 due to too much economic uncertainty, with 40% reporting that current staffing levels already meet or exceed their needs—perhaps the result of efficiencies adopted during the lean years of the recession, posits Lori Schultz (at right), Yoh’s president.
“The optimism evident in study is tempered by persistent economic uncertainty and operational efficiency that has reduced demand for workers,” she added. “In addition, as the workforce grows more complex – through, for example, the use of contract labor – a majority of organizations will be left flat-footed since they haven’t adjusted their workforce planning habits to account for this complexity.”
Here are some other worrisome findings Yoh uncovered regarding hiring plans:
- Politics could impede hiring plans. Some 45% of respondents note that the recent and ongoing political climate, including continuing fiscal policy negotiations, will slow or freeze their hiring plans for 2013.
- Obamacare could also deter hiring. Some 27% of companies say that they expect the implementation of Obamacare to suppress hiring in 2013. An additional 16% say they cannot even begin to guess at Obamacare’s impact on hiring, suggesting further uncertainty heading into 2013.
- Companies struggle to source top talent. The vast majority—81%—of organizations surveyed report that quality (i.e., finding top performers) is the most important factor when hiring new employees. Yet 91 percent of respondents have encountered challenges finding and/or recruiting qualified, skilled professionals that fit their talent needs. A quarter of employers have difficulty recruiting candidates once they find them, and 65 percent have trouble even finding such talent.
- Workforce complexity grows due to continued use of contract labor in 2013. Two-thirds of the respondents expect to use temporary employees or contract workers in 2013, and 75% of companies surveyed expect to maintain or increase their use of contract labor. The widespread use of contract workers raises a number of issues for employers, from the increased complexity of sourcing and recruiting to the tracking and management of these temporary workers.
- Companies struggle with workforce planning. Despite many companies’ intentions to expand hiring in 2013, only 13% have a workforce plan with defined contingencies. Without proactively addressing the impact of events that could significantly affect workforce planning, the majority of companies jeopardize the success of their recruiting. Compounding the lack of contingency plans, 67% of respondents delay workforce plan reconciliation for a quarter or longer. This figure includes 17% who don’t re-evaluate staffing needs at regular intervals or only do so when changes in demand become clearly evident.
- Recruiting remains a challenge. While 91% of respondents admit they face difficulties finding or recruiting candidates, 61% of organizations still plan to handle all recruiting processes internally. This confidence doesn’t seem to align with current uncertainty and workforce complexity nor with untapped opportunities to make greater use of social media for recruiting, and contingency workforce planning for quick adaptations if conditions change.
Now, some of that applies to trucking and some of it doesn’t, but Yoh’s survey findings reveal some pretty major uphill challenges face businesses of all stripes – not just freight carriers – in terms of determining whether or not the time to hire more folks has arrived.