Slowdown in E-Commerce Hitting Logistics Companies’ Payrolls, Experts Say

Date: Monday, March 13, 2023
Source: Wall Street Journal

Logistics operators slashed nearly 17,000 jobs last month as consumer spending shifts to services from goods, and e-commerce growth stalls.

Trucking, warehousing and parcel-delivery companies cut a combined 16,900 jobs in February, following a drop of 2,200 jobs in January, according to seasonally adjusted preliminary employment figures released Friday by the U.S. Bureau of Labor Statistics.

The pullback came as the broader U.S. economy added 311,000 jobs, driven by growth in service sectors such as restaurants, hospitals and nursing homes.

February is typically a soft month for logistics hiring as companies pull back after the peak shipping season at the end of the year, but these latest figures reflect a broader cooling of demand, said Aaron Terrazas, chief economist at company-ratings website Glassdoor Inc.

“We’ve seen all of the big retailers that do e-commerce talk about slowing demand and pulling back on really the massive investments they’ve made in terms of warehousing and distribution capacity,” Mr. Terrazas said. “That’s really a big part of what’s driving the courier, messenger and warehousing decline.”

Warehousing and storage companies cut 5,500 jobs last month after adding 1,500 the previous month, according to the BLS data. That was among the largest monthly drops in employment in the sector in the past decade, though overall it has added 612,100 jobs since February 2020.

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.

The boom in online ordering that took place amid the Covid-19 pandemic is slowing, which is hitting the warehousing and parcel-carrier sectors particularly hard, said Satish Jindel, president of ShipMatrix Inc., which analyzes package-shipping data.

February parcel volume was down in the estimated mid-single digits compared with a year earlier, Mr. Jindel said. “The warehousing labor market is not going to rebound for the next several weeks or months,” he said.

Amid that slowdown in freight demand, many logistics companies have been pulling back on hiring or cutting jobs in recent months as the supply-chain disruptions that led to tens of thousands of new jobs recede.

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 released Tuesday 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 in the largest drop in employment since April 2020 when 84,500 jobs in the sector were cut. Still, Mr. Terrazas said that was less than anticipated.

“The reality is for as much as they’re down, I don’t think they’re down as much as you’d expect given the collapse in line-haul rates over the past few months,” Mr. Terrazas said.

Executives at some trucking companies have said they anticipate freight demand will be slow for the first half of the year and will then rebound as retailers begin placing more orders.

The most recent Logistics Managers’ Index measuring logistics activity in the U.S. showed transportation prices were contracting in February at the fastest rate in the index’s 61/2-year history.

[Read from the original source.]