Employment levels at the U.S. operations of the Class I railroads rose in July on a monthly sequential basis, increasing nearly 1% from June.
The number of employees totaled 117,230 in mid-July, up 0.95% from June, according to data received by the Surface Transportation Board (STB). The last time that employee headcount rose was between March and April of this year.
A 5.3% gain in the number of train and engine (T&E) crew employed by the railroads helped push July’s total higher. T&E crews totaled 44,772 mid-month, compared with 42,536 workers in June. The T&E category is more sensitive to market demand; its numbers can fluctuate on network capacity needs.
The gain under the T&E category follows the increase in rail volumes in July. Although U.S. rail traffic in July was down 9.3% year-over-year, at 2.34 million carloads and intermodal units according to the Association of American Railroads, volume was actually higher on a sequential basis as volumes were recovering from April and May. May’s monthly U.S rail volumes totaled 1.65 million carloads and intermodal units, while June’s monthly volumes totaled 1.8 million carloads and intermodal units.
But headcount for train and engine employees falls by nearly a quarter year-over-year
The T&E category is the only category that grew sequentially between June and July.
But the T&E category — as well as all the other five categories — are significantly lower headcount-wise on a year-over-year basis.
Indeed, between July 2019 and July 2020, headcount at the U.S. operations of the Class I railroads fell 16.7%, while the T&E category tumbled 24.5%.
While the headcount declines can be partly attributable to lower volumes in 2019 and 2020 compared with other recent years, the deployment of precision scheduled railroading (PSR) among all of the Class I railroads has been a key factor in the decline in total rail employment. PSR as an operational model seeks to streamline rail operations, and its deployment has resulted in lane readjustments, reduced crew starts and the closures of hump yards and mechanical facilities as part of broader efforts to deliver goods in a more timely and efficient manner, according to its proponents.
The COVID-19 pandemic hastened the further deployment of some PSR initiatives such as longer trains. Staff were also furloughed as a way to adjust to the volume declines seen in late March through May.
Although U.S. rail traffic has started to grow again from its pandemic-induced springtime lows, many of the railroads said during their second-quarter earnings calls that they don’t anticipate bringing employees back on a one-for-one basis. Some of the operational changes that were made as a result of the pandemic could be in place longer term or permanently, executives said.
“We’ve gone down 5,000 employees versus Q2 of last year. That’s a 20% reduction. We’re kind of lapping now the big step change from the TOP21 implementation [NS’ version of PSR]. But obviously, we’re still chasing a Q2 volume decline that was pretty significant, said Norfolk Southern (NYSE: NSC) Chief Financial Officer Mark George during his company’s second-quarter earnings call on July 29.
George continued, “We are focused on trying to rebuild that productivity curve. … With any volume growth that comes here in the back half [of 2020], we can absorb it with what we have, but [we] also continue to look for more productivity opportunities. I’m not going to put a fine point or a number on guidance for headcount, but for sure it’s going to be an area that we’re focused on leveraging while we enjoy the volume recovery.”
Union Pacific (NYSE: UNP) Chief Operating Officer Jim Vena expressed similar sentiments during his company’s second-quarter earnings call on July 23.
“We can be more productive in the entire company… meaning that we need less people. And as we transition, we’re not hiring, OK? The normal attrition rate that goes out is going to go out,” Vena said. “So our plan is, in operations and [for] the rest of the company, that we are going to be more productive. And I think in operations you will continue to see us be more productive in pieces that we haven’t even tackled yet.”