Trucking rates rise amid restrictions on immigrant drivers

Trucking giants say their pricing power is improving because capacity in the industry is declining.

Old Dominion showed that on Wednesday, after it reported better-than-expected profits for the first quarter, and J.B. Hunt showed something similar a couple weeks ago. Why is capacity down? Well, the Trump administration has made it more difficult for immigrant truck drivers to get licenses — driver ranks are shrinking, and supply and demand dynamics do the rest.

The trucking industry is in a turnaround after three years or so of excess capacity that depressed pricing power.

“There’s no question (of) that in both spot and contract rates — particularly the spot rates, which are a good leading indicator that rates are up,” said Noël Perry, principal at Transport Futures and chief economist for truckstop.com.

Perry said he’s seen prices rising as much as 20% — not a spike at the level of the COVID-19-era, but still significant.

“The demand side has not shown any strength, and so the first conclusion we take about this increase … is that this is a supply-side-driven, capacity-driven event,” Perry said.

That means there are fewer drivers, and Perry said the Trump administration’s policies are the cause. The administration tightened requirements that immigrant truck drivers be fluent in English, and as of February barred all but a few types of visa holders.

Satish Jindel, president of logistics firm ShipMatrix, is seeing the effects as well.

“Most of these drivers were working for smaller carriers, and they are filing bankrupcy,” he said. “They are shutting down, and that is reducing the capacity.”

Jindel said he’s not exactly broken up about that, because he said he has serious safety concerns about some immigrant drivers. Some were poorly trained, he said, and others had trouble understanding road signs.

“They were causing problems for the general public,” Jindel said of some immigrant drivers. However, there is no evidence to suggest immigrant drivers are less safe than American-born ones.

The Trump administration’s limits are expansive, far beyond what’s necessary for safety, said Michael Belzer, professor of transportation economics at Wayne State University. He pointed to the limits on recipients of the Deferred Action for Childhood Arrivals program.

“If they’re DACA [recipients], they probably grew up here as children,” Belzer said. “That’s the whole point. And they’re therefore sufficiently fluent in English to drive a truck.”

Belzer said those drivers should remain, because such a large chunk of the labor pool would be difficult to replace.