Market Overview

May U.S. Rail Employment Levels Dropped. Will They Keep Falling?

May U.S. Rail Employment Levels Dropped. Will They Keep Falling?

Rail employment levels fell nearly 3 percent in May on a year-over-year basis amid the deployment of precision scheduled railroading (PSR), an operating model that seeks to streamline operations, at several of the Class I railroads.

In May, the U.S. rail operations of Class I railroads employed 142,950 workers, which is 2.8 percent fewer than May 2018 but up 0.3 percent from April, according to data submitted to the Surface Transportation Board.

Of that total, the number of train and engine employees fell to its lowest level since February 2018. The U.S. operations of the Class I railroads employed 60,256 train and engine workers in May, down 2.2 percent from May 2018 and 4.2 percent from April. The train and engine employee category can reflect the railroads' response to changes in rail volume levels, and U.S. rail volumes presently are lower this year than last year.

Lower rail volumes and the deployment of PSR at Union Pacific (NYSE: UNP), Norfolk Southern (NYSE: NSC) and Kansas City Southern (NYSE: KSU) were among the factors contributing to the rail headcount decline.

"While softer than expected volumes to start 2019 have certainly enabled the rails to cut volume-sensitive staffing, successful PSR implementation and related efficiency gains (longer trains, less interim car handling) have enabled lower terminal and train operator headcount," Susquehanna Financial Group analyst Bascome Majors said in a June 19 research note.

Could rail employment levels drop even further?

Headcount levels for all U.S.-based rail employees have been below the 150,000 level since January 2017. That decline is part of a longer-term trend. Just within the last five years, monthly employment levels busted the 170,000 level from December 2014 to July 2015, peaking at 174,122 in April 2015. But headcount totals have fallen since then.

Should the Class I railroads see rail volumes sustainably increase, furloughed workers could be called back to meet network capacity needs, resulting in a bump up of headcount levels. But another factor that could affect headcount levels in the long-term is the deployment of automation technologies.

The potential of automation technologies displacing rail workers has gotten the attention of some members of Congress, some of whom have expressed concerns that the railroads have cut employee levels too drastically as PSR takes hold.

"Eliminating the workforce…seems like a bad idea for the longevity of the national network," said Rep. Peter DeFazio (D-Oregon) at a rail safety hearing held by the U.S. House Subcommittee Railroads, Pipelines and Hazardous Materials. DeFazio's remarks were directed both to the freight railroads and Amtrak, which is considering trimming its internal police force by as much as 20 percent.

When asked whether technology could replace rail workers one day, Association of American Railroads president Ian Jefferies said he still saw a "huge demand" for workers.

"It's incumbent upon all of us at this table to figure out" how to guide the rail workforce during any transition, Jefferies said, referring to fellow witnesses testifying at the hearing. The other witnesses were the leaders of the main railroad unions.

"It may require a change of roles at the end of the day…We are a fully collectively bargained industry. We're required to be at the table" as the shape and look of the workforce evolves, Jefferies said.

John Previsich, president of the SMART Transportation Division, said the unions were ready to work with the railroads as the industry transitions to utilizing technology even further.

"We have a history of bargaining with respect to technological movements," Previsich said, citing the industry evolution from steam locomotives to diesel locomotives.

"We're not luddites. We get it. The challenge is that, along the way, you don't want safety to be compromised by the lack of regulatory oversight. There is a minimum standard that must be maintained," Previsich said.

Image Sourced From Pixabay

Posted-In: Freight Freightwaves Logistics Railroads Industry Supply ChainNews Markets General


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