Shortage of truckers starting to cause prices to rise

The Washington Post

Joyce Brenny, chief executive of Brenny Transportation in Minnesota, gave her truck drivers a 15 percent raise this year, but she still can’t find enough workers for a job that now pays $80,000 a year.

A year ago, when customers would call Brenny, she could almost always get their goods loaded on a truck and moving within a day or two. Now she’s warning customers it could take two weeks to find an available truck and driver.

Shipping costs have skyrocketed in the U.S. in 2018, one of the clearest signs yet of a strong economy that might be starting to overheat. Higher transportation costs are beginning to cause prices of anything that spends time on a truck to rise. Amazon, for example, just implemented a 20 percent hike for its Prime program that delivers goods to customers in two days, and General Mills, the maker of Cheerios and Betty Crocker, said prices of some of its cereals and snacks are going up because of an “unprecedented” rise in freight costs. Tyson Foods, a large meat seller, and John Deere, a farm and construction equipment, also recently announced they will increase prices, blaming higher shipping costs.

The trucking industry shows an extraordinary labor shortage in one corner of the economy can spill out and affect the economy more broadly.

“I’ve never seen it like this, ever,” said Brenny, who has been in the trucking industry for 30 years. “It doesn’t matter what the load even pays. There are just not drivers.”

Trucking executives say their industry is experiencing a perfect storm: The economic upswing is creating heavy demand for trucks, but it’s hard to find drivers with unemployment so low. Young Americans are ignoring the job openings because they fear self-driving trucks will soon dominate the industry. Waymo, the driverless car company owned by Alphabet, just launched a self-driving truck pilot program in Atlanta, although trucking industry veterans argue it will be a long time before drivers go away entirely.

Brenny anticipates she will have to raise pay another 10 percent before the end of the year to ensure that other companies don’t steal her drivers.

“The drivers deserve the wages. They really do, but the raises are coming so fast that it’s hard to handle,” said Brenny, who is having to adjust contracts for drivers — and customers — rapidly.

The U.S. has had a truck driver shortage for years, but experts say it’s hitting a crisis level this year. There’s even more demand for truckers now as just about every sector of the economy is expanding and online sales continue to soar. On top of that, the federal government imposed a new rule in December that requires drivers to be on the road for no more than 11 hours at a time. Drivers are now tracked by an electronic device that monitors their time so they can’t cheat.

“It’s as bad as it’s ever been” to find drivers, said Bob Costello, chief economist at the American Trucking Associations. “Companies are doing everything they can to make drivers happy: increasing pay and getting them home more often, but that means they aren’t driving as many miles.”

America had a shortage of 51,000 truck drivers at the end of last year, Costello found, up from a shortage of 36,000 in 2016. He says “without a doubt” it’s going to be even higher this year, even though many companies are giving double-digit raises. He gets asked about the driver scarcity daily as companies try to figure out how to handle the growing backlog. His best advice is for companies to invest in technology like what Uber and Lyft have to cut down on the time a driver or truck sits idle between runs.

As driver pay rises quickly and diesel fuel costs tick up, shipping companies are charging higher and higher rates to move goods. It now costs more than $1.85 a mile to ship a “dry good” that doesn’t require refrigeration or special accommodation, a nearly 40 percent increase from the price a year ago, according to data from DAT Solutions.

Shipping costs hit an all-time high earlier this year and have remained near that level ever since, according to DAT Solutions and the Cass Freight Index Report.

Manufacturers are complaining that higher shipping costs are causing their profits to fall. It was a constant topic of discussion as American firms reported earnings in recent weeks. Walmart said this week that high transportation costs are its “primary head wind” right now.

Economists warn those costs are almost certainly going to end up resulting in higher prices for everyday items that many Americans purchase.

“Every single good ends up on a truck at some point. Businesses that use trucking to receive and ship goods are going to do their best to pass on the costs to the rest of us,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

Logistics and transportation accounts for about 10 cents of every dollar in the U.S. economy, says Donald Broughton of Broughton Capital and author of the Cass Freight Index publication.

“I don’t normally speak in hyperbole, but we’re entering some uncharted territory,” Broughton said. “If there is a 10 percent increase in transportation costs, that gives you a 1 percent increase in inflation for the broader economy. That’s real.”

It could mark a turning point for the U.S. economy. Inflation has stayed unusually low in the past decade, largely because costs have stayed low for food, clothes and other items Americans buy in store or online as companies got more efficient and worker wages barely increased. But rising shipping costs could change that dynamic in 2018, potentially forcing people to have to spend more and employers to hike pay as they try to compete for workers with the trucking industry.

There already aren’t enough trucks on the road to keep up with demand this spring. It could get even worse when the holiday season hits.

Trucking companies hope they can lure more drivers with higher pay, signing bonuses and shorter hours. The job doesn’t require a high school degree or being in great shape. Someone can obtain a truck license in a matter of weeks, although they must pass a drug test. But many say the biggest hindrance is that the job doesn’t have a lot of cachet in modern society, a perception that’s hard to change.

“You are away from home and family and friends on a regular basis, and the job is not highly respected,” Broughton said.