The Postal Market Drove Employment Growth in December Jobs Report

The December Jobs report reported today showed that 200,000 jobs were created in December and the unemployment rate dropped to 8.5%. This was better news than most forecasters expected and stock futures jumped on the news. The detailed industry data clearly shows that the postal market drove jobs growth.

The Postal Market’s Impact on December Jobs Growth

Firms that deliver mail and parcels generated over one-fifth (1/5) of the nation’s seasonally-adjusted job growth in the past month. These firms added 41,400 jobs in December on a seasonally-adjusted basis. Of this figure, private-sector firms added 42,400, while the Postal Service lost 800.

If you look at the jobs growth on an unadjusted basis, the industry added 89,400 jobs in December, of which 85,900 were generated in the private sector. This larger jobs figure illustrates the scale of the challenge that FedEx, United Parcel Service and the Postal Service have in expanding their workforce during the holiday season in order to serve the peak demand in business to consumer parcel shipments.

The significant growth in jobs associated with delivering mail and parcels does not fully describe the impact that the postal market had in the improving job pictures. Carriers in the industry are major purchasers of nearly everything you can imagine including airplanes and airplane parts, trucks and truck parts, diesel fuel and gasoline, as well as a wide range of consumables including packaging materials and rubber bands. The increased employment in this sector also generated jobs growth in firms that supply FedEx, the Postal Service, United Parcel Service and hundreds of smaller delivery firms.

Jobs growth associated with delivering mail and parcels suggests that there is also growth in the businesses selling the goods and printing the mail that these firms are delivering. Previous studies have shown that most jobs in the industry are not involved in physically delivering mail and parcels, so a growth in jobs associated with delivery means that there was a growth in jobs in the industries that produce what postal industry carriers deliver.

Impact of Industry Jobs Growth on Public Policy

The Postal industry has long touted its importance in the economy. The December jobs growth shows how maintaining its health is needed to keep the recovery on track. Congress needs to carefully evaluate policy options in regards to the economic impact of the policy option. To date, neither the House nor the Senate has thought to develop a pro-economic-growth postal policy or explain how legislative proposals that are closest to passage will affect economic growth.

Right now, all policy options are focused on finding a way to cut costs as a way to get the Postal Service out of its financial crisis. Cost cuts represent a key part of all proposals because the Postal Service is still considered by Congress to be a government service and cost cuts are the best way to ensure that postal reform legislation has a positive impact in reducing the federal budget deficit.

While cost cutting may be needed, the December jobs numbers suggests that Congress’s attention has been misfocused.  It should have instead looked at the Postal Service as a potential enabler of economic growth and developed a legislative proposal that solves the Postal Service’s financial problems in a manner that could have fully given the Postal Service the opportunity to transform itself, as demand for postal services changed.   A legislative plan like that would have had a strong positive economic impact and the greatest long-term economic impact, while still assuring that universal service requirements, rural postal needs, and financial viability and self-sufficiency goals are met. Such paths are known and have been discussed previously in this blog.

Impact of the Jobs Report on Postal Wages

The jobs report provides another hint that there is a floor on what the Postal Service can pay its employees. Rapid growth among firms competing for potential employees coming from the same demographic pool will likely force wage rates up, as the number of individuals in the pool drops as hiring increases. The Postal Service saw that happen trying to hire PSE drivers in at least four metropolitan areas. If jobs growth in the private sector remains strong, the Postal Service will continue to see the need to adjust upward wages advertised for PSE positions in some crafts to compete for good employees.

This does not mean that some compensation levels at the Postal Service are not above market. Many unionized employees, who are paid at the maximum possible rate, are likely being paid above the market clearing rate for the type of job they perform. A combination of normal attrition and early retirement incentives could reduce the number of unionized employees paid at the highest levels for their craft fairly quickly. Once those retirements occur, the Postal Service could begin the process of hiring a new generation of employees at wages close to market-clearing levels. The combination of retirements and hiring of new employees at market-clearing wage levels should fairly quickly put average wage levels at levels similar to that of a private-sector firm hiring in a competitive labor market.

Once a generational shift among Postal Service employees occurs, growing demand for employees among trucking firms, couriers, and messengers could change the dynamics of labor negotiations. At that time, both the Postal Service and its unions will be looking at ways to raise wages, although they will still be haggling over work-rules and the proportion of part-time employees in order to bring these parts of the Postal Service’s union agreements closer to what exists at United Parcel Service and non-union employers, including FedEx.