Increasing demand for driver training programs
Driver training schools are seeing an influx of those interested in joining the trucking industry.
“We raised pay enough over the past two years that it’s caught people’s attention, and they are valuing the jobs that we are providing more now than they were a few years ago,” Rob Hatchett, president of fleet intel at Conversion Interactive Agency told Transport Topics, “But we’ve got to have more trainers so they can train more new entrances [of drivers].”
The Bureau of Labor Statistics appears to support the increased demand. FreightWaves’ John Kinston writes, “The job growth in the truck transportation sector has been stunning this year. February was the one post-pandemic month since April 2020 that had a decline in jobs, dropping 2,700. But the other months have been a streak like the BLS has never recorded over the last 10 years, with gains, starting in January, of 6,800, 11,000, 14,900, 15,700, 6,100 and 4,000, before the 800 job-increase posted in August. (Those numbers omit the February decline.)”
Many of these new driver applicants will face additional hurdles such as states working through CDL test bottlenecks and navigating the backlog of applicants to existing CDL schools. Additionally, pandemic-related restrictions for CDL schools mean that many were either closed or operating at half capacity during parts of 2020 and 2021.
I would expect larger carriers who sponsor their own CDL schools to benefit the most, as this provides a direct pipeline into addressing existing turnover challenges. For smaller carriers, there will be an influx of experienced drivers either attempting to re-enter the industry or finally meet the experience requirements to be hired.
Transportation M&A: All gas, no brakes
Transportation mergers and acquisitions activity remains robust in spite of a downturn in the trucking business cycle. Part of this increase in activity relates to attracting earnings multiples and valuations.
Peter Stefanovich, president at Left Lane Associates, told FreightWaves, “We’ve never been busier — ever. Even with the macroeconomic trends that are going on … because of the industry and the resilience, the multiples and the value of what people are looking for from an acquisition standpoint are holding steady. They’re not diminishing.”
Another factor relates to equipment shortages. FreightWaves’ Todd Maiden writes, “Fleets with deep coffers are using M&A to sidestep supply constraints. Many continue to acquire competitors, noting that it’s not just an acquisition of another carrier and its accounts that are attractive but the ability to quickly pick up equipment, terminals and drivers.”
Some of these deals expand truckload fleet offerings. Heartland acquired over-the-road and refrigerated truckload fleets from Contract Freighters Inc. for $525 million. The deal increased Heartland’s footprint with 2,100 tractors, 8,000 trailers and six terminals.
For other large carriers, the M&A activity saw them move to different modes of transportation. Schneider National in recent years saw intermodal and logistics account for 60% of revenue in 2021 compared to 42% in 2017. Further evidence of large truckload carriers moving away from traditional TL business is Knight-Swift Transportation acquiring two less-than-truckload carriers.
The movement away from trucking into other modes appears to be growth based.
“People want to gain market share … whether they have an existing asset-based fleet or just add scale by adding a different line of focus from a logistics standpoint than what they’re used to,” Stefanovich said. “It’s not just in trucking. It’s in logistics as well and warehousing too. If you look at it across the board, it’s going to be strong.”
Market update: Consumer credit utilization trends higher
Analysis courtesy of FreightWaves’ Anthony Smith, chief economist.
The jobs market had many bright spots last week. The headline number for job openings shows 11.2 million in July, a slight month-over-month increase. Transportation and warehousing led the charge for openings in July. However, subcomponents within the report showed that although there are more jobs being posted, employers are slowing down the pace of hiring and employees are slowing down on their quitting.
The overall job market conditions signal that consumers will have a bit more runway, though their conditions are still far from safe or secure. Inflationary levels are still elevated, and a slowing in hiring will mean that despite the number of job openings, finding a new position may prove to be more difficult than the headline numbers suggest. Disposable income is coming down, savings rates are at lows not seen in over a decade, and there will be updates in the coming weeks around consumer credit utilization, which has been rising substantially over the past few quarters. Consumer health and the ability to spend will be significant factors in freight demand during the remainder of the year.
FreightWaves SONAR spotlight: Diesel prices stabilize as DOE declines to $5.084 per gallon
Summary: The daily retail truck stop diesel price (DTS) held steady over the Labor Day weekend to close at $5.088 per gallon. The DOE price released Tuesday fell 3.1 cents per gallon to $5.084, which is the 10th time in the last 11 weeks that the benchmark price, a basis for most fuel surcharges, has dropped.
Concerns on future demand hinge on two major topics — global outlook for diesel demand and whether diesel fuel will replace natural gas for European energy production. FreightWaves’ John Kingston writes, “Markets remain concerned about a loss of demand resulting from a global slowdown in activity. That sentiment is so strong that it is overcoming sharp increases in recent weeks in global natural gas prices. The two commodities are not directly linked, but strong rises in one can often spill over to the other, particularly in diesel, where some natural gas applications will turn to diesel as a substitute fuel during times of high natural gas prices.”
The Routing Guide: Links from around the web
UPS fails in second shot at bypassing driver-trainer rules (FreightWaves)
How will the European energy crisis affect freight markets? (FreightWaves)
Deconstructing the SPAC frenzy: What went right and wrong? (FreightWaves)
Policy changes on horizon for autonomous and electric trucks (FreightWaves)
‘A full-blown crisis’: East Coast truckers grapple with surging empties, lack of chassis (Transport Dive)
