With the trucking market still stuck in a lull both due to an imbalance in freight demand and an oversupply of capacity, driver pay momentum has been mostly stagnant throughout 2024, and NTI expects that muted activity to continue through the remainder of the year.
Capacity is exiting the market in terms of both carrier count and driver count, and several large publicly traded carriers have reported cutting vehicle counts intentionally as a means to rebalance. However, carrier and driver supply still outweigh demand, and until those supply and demand dynamics rebalance more into carriers’ favor, fleets will continue to conservatively approach the market, make decisions, and evaluate costs, including those related to driver pay changes.
NTI does see private fleets and dedicated 3PL carriers continuing to be active in benchmarking their pay and making adjustments to attract the drivers they want and need. While capacity has exited the market in the for-hire segment, that has not happened for private fleets. Private fleet driver and vehicle counts continue to grow, whereas those have been in decline in the for-hire segment throughout 2023 and 2024. Private fleets are using the current market to hire and grow their fleet, and even to restructure pay models to simplify them, make them easier for drivers to understand, and to better market their job opportunities to prospective hires.
One element NTI is watching slightly longer term — within the next year to 18 months — is what happens with wages when capacity and demand rebalance or shift the other direction.
Here’s why: The timing of such a freight rebound and inflationary market could align with many drivers who are earning their needed one to two years of experience to qualify for higher-paying jobs, and they will likely be quick to jump to those jobs when hiring demand surges again.
Should hiring activity ramp up among that cohort — drivers with 2 years of experience or more, in particular — wage pressures would ramp up for those drivers as fleets compete for them.
This would also have downstream effects. As the industry’s focus of attracting newcomers to trucking jobs has also waned, the pipeline of new entrants to the industry is being depleted (read more on that below).
When a freight market rebound occurs, demand for capacity returns, and freight rates begin to climb, driver hiring activity will follow, and the need for newcomers will become a point of emphasis again. Thus, wages for drivers with one year of experience or less will also jump. Throughout the pandemic recovery era of late 2020 through early 2022, wages for drivers with one year of experience had the most momentum, with year-over-year percentage growth sometimes double that of cap earners (drivers with the most experience and the highest pay).
The next freight market rebound will likely see eerily similar dynamics play out.
Driver recruiting data hints at this looming pinch, too
Fleets report on a daily basis to NTI that they continue to struggle with retention, particularly for-hire motor carriers, though private fleets have also reported that turnover remains higher than they would like, particularly within a new hire’s first weeks and months on the job.
While this is anecdotally what NTI hears from motor carriers and private fleets on a daily basis, it’s also supported by data from NTI. Indicators of hiring activity show no signs of deterioration. Prevalence of sign-on bonuses and referral bonuses have seen little meaningful change since the freight market correction cycle began in mid to late 2022, while the amounts for these bonuses have seen only small declines. Prevalence and dollar amount for sign-on bonuses remain higher than the robust hiring market of 2021, the same year that base pay also climbed more than 10%.
Data also shows driver hiring remains higher in 2024 than any year over the past five years. April 2024 was one of the strongest months for driver hiring since the beginning of 2020, and 2024’s monthly average for driver hires through April is higher than 2021, 2022, and 2023.
Fleets aren’t trying to grow in this market — such as adding trucks and drivers to meet higher demand from customers. NTI contends the hiring activity signaled by the data is replacement demand driven by continued elevated turnover.
Why is this the case? Obviously turnover and retention are always undercurrents that impact fleets through any market, but in the current cycle, there are three key elements:
(1) Drivers’ take-home pay is flat and in some cases declining, despite base wages growing nearly 20% from the end of 2020 through early 2024. Productivity is down, whether that’s miles, hours, loads, etc., and the loss of productivity cuts into drivers’ earning ability. Incentives for safety, productivity, performance, and fuel, as examples, have seen attention and have climbed over the past two years, but they are not enough to offset the loss of productivity. Thus, drivers may grow frustrated by this dynamic and switch employers to try to find something that better aligns with what they want to earn.
(2) The leading perpetual driver supply constraints are exacerbated in this market: driver age and health, drug and alcohol violations, and desirability of the jobs available, to name a few.
(3) Many, of course not all, carriers have shifted their focus away from retention efforts. Fleets are successfully filling seats. Recruiting drivers is easier than it was in 2021 and 2022, and the appetite to replace drivers who leave is much bigger than it was, especially if they can replace a driver at a slightly lower pay rate.
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With the new entrant pipeline being depleted and turnover still elevated, the trends spelled out above could converge to build strong pressure on driver pay across experience levels when the freight market begins a recovery and enters a more robust market.
