Thanks to the COVID-19 pandemic-induced lockdowns, e-commerce companies experienced a significant demand increase across 2020-21. Even in the first half of 2022, this demand continued to increase, with the first signs of a dip coming in slowly. In 2023, e-commerce demand seems to have fallen and plateaued, as consumers once again focus on the services sector. This evolving trend and inflationary pressures have pushed logistics companies to slow down too. In fact, logistics operators cut jobs by almost 17,000 last month in the midst of consumer spending shifting from goods to services, and as e-commerce growth stalls.
Preliminary employment figures released by the US Bureau of Labor Statistics on Friday revealed that trucking, warehousing, and parcel-delivery firms reduced their workforce by a combined 16,900 jobs in February, which follows a decrease of 2,200 jobs in January. Meanwhile, the broader US economy added 311,000 jobs in February, mainly in the service sectors such as restaurants, hospitals, and nursing homes.
Typically, February is a weak month for logistics recruitment as companies scale down operations after the peak shipping season at the end of the previous year. However, these recent figures indicate a more extensive drop in demand.
The BLS data showed that warehousing and storage companies also shed 5,500 jobs last month, following a gain of 1,500 in the preceding month. While this is one of the most substantial monthly declines in the sector’s employment over the last decade, it’s created 612,100 jobs overall since February 2020.
U.S. ports handled 1.73 million inbound containers in December measured in 20-foot equivalent units, or TEUs, down 16.2% from the previous month, according to a report by Descartes Datamyne, a trade intelligence database owned by supply-chain software company Descartes Systems Group Inc. The Cass Freight Index, which measures trucking and rail shipments moving in the U.S., dropped 3.2% from December to January, the most recent data available.
Trucking employment fell by 8,500 jobs in February, the largest drop in employment since April 2020 when 84,500 jobs in the sector were cut.
Courier and messenger companies, including the package carriers that deliver e-commerce orders to homes and businesses, cut payrolls by 2,900 jobs last month on top of a drop of 5,000 jobs in January, according to the BLS data. Employment in the sector is down 31,300 jobs year over year.
Key Takeaways
The surge in online ordering during the COVID-19 pandemic is decelerating, which is particularly affecting the warehousing and parcel-carrier industries. Despite the collapse of line-haul rates in recent months, job cuts are not as severe as expected.
According to executives at some trucking companies, freight demand is projected to be sluggish in the first half of the year but rebound as retailers place more orders. The Logistics Managers’ Index, which measures logistics activity in the US, revealed that transportation prices contracted in February at the fastest pace in the index’s 6 1/2-year history. While all of these factors are contributing to the job cuts, it remains to be seen how logistics companies will fare in the second half of 2023.
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