Rising Labor Costs and Declining Cargo Squeeze US Rail Profits
🛤 Rising Labor Costs and Declining Cargo Squeeze US Rail Profits.
US railroad companies, including Union Pacific Corp., CSX Corp., and Norfolk Southern Corp., are facing a squeeze on operating profits due to higher labor costs and weaker sales amid an ongoing freight recession. Operating profits for these companies dropped by at least 12% in the second quarter compared to the previous year. The decline is expected to continue during the second half of the year. The weak market conditions are driven by consumers spending more on services and reducing purchases of shipped goods. Additionally, the railroads are dealing with elevated labor costs due to a recent union labor contract that included wage increases and additional benefits. Despite the challenges, railroad earnings have not declined as much as those of trucking companies, mainly due to captive customers and the lack of new major railroads being built in the US.
The Department of Labor just ordered three cross-border logistics companies in San Diego to shell out $840,000 in back wages and fines to warehouse and transportation workers.