Labor shortage for railroads that have slashed workforce by 33%

More wailing about workers

“No way did I realize how difficult it was going to be to try and get people to come to work these days…” CEO of CSX.

There are few hiccups in the US economy right now. James Foote, the chief executive of CSX, one of the largest railroads in the US, put it this way:

“In January when I got on this [earnings] call, I said we were hiring because we anticipated growth. I fully expected that by now we would have about 500 new T&E [train and engine] employees on the property,” he said. “No way did I or anybody else in the last six months realize how difficult it was going to be to try and get people to come to work these days.”

“It’s an enormous challenge for us to go out and find people that want to be conductors on the railroad, just like it’s hard to find people that want to be baristas or anything else, it’s very, very difficult,” he said.  So even though we brought on 200 new employees, we fell short of where we thought we would be by now….”

Railroads are grappling with a weird phenomenon that is a combination of “labor shortages” and 12.6 million people still claiming some form of unemployment compensation, amid stimulus-fueled demand.

This comes after railroads had spent six years shedding employees in order to tickle Wall Street analysts and pump up stock prices. The North American Class 1 freight railroads combined—BNSF, Union Pacific, Norfolk Southern, CSX, Canadian National, Kansas City Southern, and Canadian Pacific—have tried to streamline their operations, using fewer but longer trains and making other changes, including the strategy of “precision scheduled railroading,” implemented first by Canadian National, then by CSX.

The resulting deterioration in service triggered numerous complaints from shippers. But one of the big benefits was that the workforce could be slashed, which fattened the profit margins at the railroads. Wall Street analysts loved it, and it was good for railroad stocks. By now, precision scheduled railroading has become the new religion at all Class 1 railroads except at BNSF, which has not officially adopted it, at least not completely.

In the process, over the past six years, the Class 1 railroads have axed 33% of their workers through layoffs and attrition. According to the Surface of Transportation Board (STB), an independent federal agency that oversees freight railroads, the Class 1 railroads slashed their headcount from 174,000 workers in April 2015 to 116,000 workers in June 2021.

Before the railroads blame the 33% cut in the workforce on the pandemic, let’s point out that by February 2020, just before the pandemic, their headcount had already been cut by 46,000 workers, or by 26%, to 128,000. Only 12,000 workers were cut during the pandemic.

During the pandemic, some of the workers were put on furlough, to be recalled more easily. But it turns out that not all of them are eager to return to work on the conditions offered by the railroads, including relocation to new assignments.

These cuts in the workforce, and now the scrambling to hire people amid “labor shortages,” is contributing to issues in meeting heavy transportation demand: Union Pacific temporarily suspended traffic from Los Angeles into Chicago, and BNSF has started to meter traffic into Chicago, to allow them to catch up unloading the trains that are stuck in their Chicago rail yards. The resulting pot-banging by frustrated shippers has gotten the attention of the STB.

“The railroads cannot strip down to bare-bones operations,” STB chairman Martin Oberman told the Wall Street Journal. “It’d be like a professional football team only having one quarterback.”

The American Chemistry Council—which represents companies in the chemical industry, such as BASF, Chemours (the DuPont spinoff), Chevron Phillips Chemical, DuPont, ExxonMobil Chemical, etc.—lamented in a letter to the STB, cited by the WSJ, that railcars were waiting at railyards for over a week and travel times for some routes more than doubled. Some factories were running out of materials because shipments had gotten hung up and were approaching the point where they’d have to close, and other factories have cut production.

The railroads “clearly weren’t as prepared as they should have been for the increase in traffic,” Jeff Sloan, senior director of regulatory and technical affairs at the Council, told the WSJ. The deteriorating service shows that the railroads cut too deep before the pandemic and were unable to catch up, he said.

This is an excerpt from an article in Railroad Workers United News. It was written and published by Wolf Richter at WOLF STREET. Richter reports on “and dissects economic, business, and financial data, Wall Street shenanigans, complex entanglements, debacles, and opportunities.” His site is worth a visit.

Hear that lonely whistle Throughout Olympia’s history, railroads have crisscrossed the city’s landscape. As James Hannum notes in “Olympia’s Railroad History,” (an essay in the People’s History of Olympia) at various points in our city’s history, we hosted three “common carrier” lines, two logging railroads and a trolley line. While the last remaining segment of one historic line is still owned by the Burlington Northern Sante Fe (the modern successor of the old Northern Pacific), any trains you see operating on it are owned by Tacoma Rail, which is operated as a public utility by the City of Tacoma.  The second railroad still in operation in Olympia is the Union Pacific. This rail line comes into an urban portion of our community up the Deschutes River valley, passing through the old Brewery Complex, under Capitol Boulevard via a tunnel and then into downtown Olympia, terminating at the Port of Olympia. Excerpted from Emmett O’Connell’s article History of the RR Lines that Cross Through Olympia, in Thurston Talk, 2014.