A note from Steve Raetz, C.H. Robinson Director of Research and Market Intelligence: The truck driver shortage is top of mind for many as supply chain disruptions continue, port backlogs persist, and the gap between inventory supply and sales demand widens. This begs the question: Even if the industry gets more truck drivers, just how much is enough to relieve the strain on trucking capacity? The answer is not simple and involves research and analysis across a number of factors.

To help offer perspective, we took this question to Jason Miller, associate professor of supply chain management at Michigan State University. Our relationships with research firms and universities like Michigan State, combined with C.H. Robinson’s own technology and data from the largest network in the freight industry, help our customers stay on top of the trends that influence their supply chains. Below, Jason shares his insights and offers recommendations for what shippers can do to obtain capacity and plan for the coming months.

How many more truck drivers are needed to balance demand for truck transportation with the supply of capacity?

My answer to this question for shippers procuring long-distance (outside of a given metropolitan area) dry van transportation, for both truckload and less than truckload (LTL), is that approximately 25,000 truck drivers are needed. As a researcher at Michigan State’s Broad College of Business, I will explain how I arrived at this figure, based on available data.

The first step in answering this question is identifying the current level of demand for truck transportation and making an assumption about the level of demand over the coming months. My preferred measure of demand for truck transportation is an index I’ve developed with my colleague Yem Bolumole at the University of Tennessee that uses data from the Census Bureau’s and Bureau of Transportation Statistics’ Commodity Flow Survey to calculate implied demand for truck transportation. This data is based on industry output derived from monthly government statistics published by the Census Bureau, Federal Reserve Board, Bureau of Labor Statistics, and Bureau of Economic Analysis.

Looking at the ton-mile index, demand for truck transportation today is slightly below what occurred in Q2 2018, being down 1.5% for Q2 2021, relative to Q2 2018. Given manufacturers’ new orders are at all-time highs and consumers’ spending on goods is at record levels, I assume that demand for truck transportation will remain at its Q2 2021 levels through the rest of the year.

Analysis of employment data

With these assumptions about demand made, I will now turn to the available data on employment. These data are published by the Bureau of Labor Statistics (BLS) through the Current Employment Statistics (CES) program, which surveys approximately 144,000 business and government agencies, representing approximately 440,000 establishments (or unique business locations).

A few caveats about these data are in order. First, the system used to classify truck transportation establishments, the North American Industrial Classification System (NAICS), is a rather aggregated view compared to how we think about classifying trucking companies within the industry. For example, the NAICS groups truck transportation establishments engaged in long-haul transportation of flatbed loads, refrigerated freight, or chemicals into the same sector (NAICS 48423: Specialized, Long-Distance Truck Transportation)—even though we would consider these distinct industry sectors. Given the NAICS maps clearest to dry van transportation via the general freight designation, and then splits general freight into truckload (NAICS 484121) and less-than-truckload (NAICS 484122)—my analysis will focus only on these two subsectors.

Second, the CES program does not distinguish between establishments that are true, for-hire companies versus establishments that are private fleets.[1] Because of this, these data likely include some private fleets, with the caveat that it would be rare for a company to have one or more unique establishments that primarily perform general freight, long-distance truck transportation, but only do so on a private fleet basis.

Third, the CES data counts all employees at an establishment, which means these data include dock workers, mechanics, dispatchers, accountants, etc., employed by an establishment that engages in truck transportation.

Fourth, the CES data does not include self-employed workers, which means they miss many owner-operators (either leased subcontractors or true independents). To the extent that self-employed workers today exceed what we observed in 2018, a likely possibility given record business applications in transportation and warehousing coupled with record new operating authority grants, the CES data will overstate the magnitude of the employment gap.

With these caveats in mind, plotted below are the CES data for employment at general freight, long-distance truckload and LTL firms. Given employment topped out at approximately 790,000 by Q4 2018 in a demand environment akin to what we are currently experiencing, I make the assumption that this number of employees would balance demand for truck transportation with capacity. Based on the most recent data released for June 2021, employment stood at 765,500. This suggests a gap of approximately 24,500 employees, which I will round to 25,000.

I want to reiterate that the unknown factor at present is the difference between the number of self-employed truck drivers today relative to late 2018 and 2019, tips the balance in this gap one direction or another. If self-employed workers today exceed what there were in late 2018 and 2019, then this 25,000 figure is an overestimate of the shortage. Conversely, if there are fewer self-employed truck drivers today than there were in late 2018 and 2019, this figure is an underestimate of the shortage.

A few words about the current hiring environment are in order. Since the low point of May 2020 through May 2021, carriers added just 1,700 employees per month, well below the average addition of approximately 4,000 employees per month we witnessed in Q1 through Q3 2018 during the prior bull market. However, in June and July 2021, carriers were able to add an average of 6,200 workers each month. Even if the pace of job gains slows, this suggests by early 2022 that carriers will have closed the approximate 25,000 worker gap.

Recommendations for navigating driver shortages

Given the current hiring environment suggests it will take some months until carriers can add enough drivers to rectify the current imbalance of supply and demand, I want to offer two recommendations for what shippers can do to obtain capacity and plan for the coming months. One recommendation is to make sure your routing guides contain a mix of asset-based providers as well as brokers. Research done by the Massachusetts Institute of Technology indicates brokers play a key role in providing overflow capacity because they do not have a fixed pool of assets. A second recommendation is for shippers to continually monitor their routing guide compliance to isolate lanes that are performing poorly. These lanes would be prime candidates for mini-bids, as chronic tender rejection is often a sign that contract prices are below market rates.

 

For additional timely updates and information about the North American surface transportation market, check out C.H. Robinson’s North American Freight Market Insights.

[1] This distinction is not made because the NAICS classifies establishments based on the type of activity the establishment performs.