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Transportation

Labor shortages continue to cast a shadow over the transportation industry as haulers struggle to keep CDL drivers and techs on their payroll. Earlier reports had driver turnover rates at their lowest in the last 20 years though.

The difficulty is that there remains a shortage of drivers to service all of the continuous demand for their services. According to a Waste360 article, city sanitation employees have clocked in nearly $1 million in overtime pay. The push to keep prices low may have prompted businesses to base their staffing models on lowest possible service needs. Living on this edge offers little room for error when demand ramps up and either contractors or overtime raises the marginal costs beyond an employment expansion.

The opposite end of this story is when capacity is set for high regular volumes that see period of slowdown. This creates a cost burden for maintaining facilities and underutilized staff. Trans-Pacific carriers are cancelling Asia-bound sailings at a higher rate in anticipation of the Lunar New Year celebrations. Another benefit of doing so will put them in a stronger bargaining position as contract negotiations begin again in March. This is another balancing act in managing labor costs. It appears that rail has been enjoying an improvement over the last decade. Union Pacific has outpaced S&P 500 growth over the past year under the leadership of Jim Vena, a protégé of railroad legend, Hunter Harrison. Some of this management success should be tempered since those same efficiency gains have been implemented in other lines that have later had to consolidate schedules and reduce opportunities to link up with short-line support.

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