- The trucking industry added 3,200 jobs in January, according to the monthly jobs report released by the US federal government.
- The unexpected boost may be tied to the latest implementation of the electronic-logging-device mandate, which requires a device that enforces federal rules around truckers’ working hours.
- Truckers were not fully prepared for this implementation, and many are now playing catch up.
- The job boost is welcome for the recession-battered trucking industry. In total, 6,600 truck drivers lost their jobs in 2019.
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After a famously challenging 2019, and a brutal earnings season last month to cap it off, trucking may be on the cusp of an unexpected bright spot.
The trucking industry added 3,200 payrolls in January, according to the most recent jobs report released by the US Bureau of Labor Statistics.
It’s a strange boon, particularly after an earnings season that made it clear that America’s largest trucking companies got battered in late 2019. C.H. Robinson, the industry’s largest broker, reported its lowest-ever net revenue margins last week since the Great Recession. Industry bellwether J.B. Hunt missed on fourth-quarter earnings, too. Thanks to rough reports, transport stocks across the board were down 8% on February 4.
Much of the decline in trucking has been linked to the downturn in manufacturing — a sector that’s not showing particularly rosy signs either, even after the US and China inked their initial tariff agreements on January 15.
The federal government said a whopping 12,000 payrolls were slashed across manufacturing in January. Meanwhile, factory activity last month expanded for the first time since July, according to the Institute for Supply Management. Experts say the uptick won’t last thanks to the potentially destabilizing effects of coronavirus.
The latest ELD implementation may have contributed to the boon
As trucking continues to face bankruptcies and profit-guidance slashes, trucking expert Donald Broughton pointed to the latest implementation of the electronic-logging-device (ELD) mandate as what might have forced trucking companies to hire more drivers.
When using an ELD, drivers are forced to more closely follow the federal hours-of-service law, which mandates how much a driver can work in a day. The law says truck drivers must fit 11 hours of driving into a 14-hour workday, while they might have previously driven much more or been able to manage their workdays outside of that rigid structure.
In December 2017, the ELD rule came into effect under a larger act passed by former President Barack Obama in 2012 — forcing hours to be tracked electronically rather than by hand, which was permissible before that date. This forced drivers who were not using an electronic device in their trucks to adopt the ELD.
An additional law came into effect in December 2019 that forced “full compliance” of the ELD rule. Companies that previously used automatic onboarding recording devices (AOBRDs) are now required to use the traditional ELDs. The AOBRDs record less data, which means some drivers might have previously gotten away with not following the the hours-of-service law to a tee.
The ELD rule shook up much of the industry in 2017, as the newly required form of tracking compressed the amount of labor a trucker could do in a single day. The latest AOBRD rule could have the same effect, Broughton said — especially because truckers hadn’t fully updated their fleets by the time the new ruling came into effect.
Truck drivers told Business Insider in early 2018 that they hated the ELD mandate, noting that it limited their ability to structure their days and initially slashed their take-home pay. But, ultimately, ELDs may have been a boon for truck drivers, as it forced trucking companies to hire more and, for a couple of reasons, jack up salaries for truckers.
In 2018, drivers’ salaries saw “unprecedented” jumps, Gordon Klemp, principal of the National Transportation Institute, told Business Insider that year. Nearly 50% of all drivers in the National Transportation Institute’s quarterly survey on trucker pay received pay bumps in 2018. The previous year, only 11% did.
Much of those gains were rolled back in 2019, when the trucking industry saw one of its biggest hits since the Great Recession.
Here’s how 2019’s AOBRD law may have upped employment in January
Broughton, who is managing partner and principal of St. Louis, Missouri-based Broughton Capital, roughly estimated that the rule regarding AOBRDs has slashed around 3.5% of America’s trucking capacity since its enforcement in December.
Part of that —1.5% of total capacity — is from removing trucks from the road to install the new ELDs, and the other part — 2% of capacity — came from the learning curve around truckers learning how to use the new device.
“If you’re struggling with utilization, the easiest answer is to go buy yourself some additional drivers,” Broughton told Business Insider.
The sharp downturn in capacity partially stems from the fact that the industry wasn’t prepared for the AOBRD switch. A Broughton Capital survey indicated that more than 40% of AOBRDs in September 2019 needed replacement, and the vast majority were waiting until the winter to swap them out.
“Nobody was doing anything about the December 2019 rule,” Broughton said. “They were so laissez-faire about it.”
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Along with the trucking industry simply needing new drivers while they transition to the new system, Broughton said the industry could see a much-welcomed boost in 2020 contract rates. January and February are when truckers set their rates for the coming year, and, if capacity is shrunk by the devices, that will allow them to argue for higher rates.
Still, it’s not clear whether the uptick will stick, experts said. Headwinds slamming the trucking industry aren’t expected to slow until at least the second half of 2020, and the environment then depends on factors like the upcoming presidential election and how other trade factors shake out.
“My crystal ball is about as muddy and unclear as possible,” Kevin Sterling, senior equity analyst at Benchmark, told Business Insider. “But I am comfortable saying that the first half is going to be challenging.”
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