FedEx took a $470 million hit in its most recent quarter due to rampant labor shortages.
According to CFO Michael Lenz, the lack of available workers inflicted a more sizable impact on the logistics firm’s bottom line than any other factor. CNN Business reported:
Although FedEx’s revenue was up nearly $3 billion to $23.5 billion in the quarter ended November 30, its adjusted income was essentially unchanged. The labor shortage was the biggest single reason, the company said…
He said the $470 million cost was split nearly evenly between two factors. The first was higher pay to employees and higher rates paid to outside trucking firms used by the company. The other half was the cost of inefficiencies — greater use of outside trucking companies, the increased cost to reposition assets in the network and the need to address staffing shortages.
FedEx — which expects the problems to continue in the present quarter — is responding with new employee hiring, engagement, and retention initiatives. CNN Business added:
The company said it is getting a good response from its current hiring efforts, given its current pay package and other offerings, including an app that provides employee-friendly, flexible schedule options. That includes the ability to pick up extra shifts when convenient or swap shifts with other workers. FedEx said in the last week alone, the company got 111,000 applications for job seekers, the highest in its history, and up from just 52,000 during a week in May of this year.
The labor shortages are by no means limited to FedEx. According to the Department of Labor’s most recent Job Openings and Labor Turnover Survey (JOLTS), which analyzed data from October, there are more than 11 million job openings in the United States — exceeding the number of people actively searching for work by 3.6 million.
Indeed, Glassdoor — a website through which employees can anonymously review companies — said in its most recent “Workplace Trends” report that the labor shortages bottlenecking economic activity will continue into next year.
“Labor shortages defined the 2021 job market. As customer demand roared back to life, employers faced acute hiring challenges as workers trickled back into the labor force,” the analysis found. “The increased competition for workers has made it exceptionally difficult to both hire and retain employees. Employers may be ready to write off the tight 2021 labor market as a pandemic-era anomaly, but they shouldn’t. Instead, 2021 should be a template for what to expect in 2022.”
“Unlike past recessions, the U.S. has largely skipped the phase of the recovery where employers have a large pool of unemployed workers to hire from,” the report continued. “Employer reliance on furloughs kept the pool of available workers relatively small throughout the pandemic.”
“The imbalance between labor supply and demand is large enough that even a moderate improvement in conditions would not be enough to make it easy to hire again. There simply is no silver bullet to fix labor shortages,” the report added.
Among the difficulties faced by companies seeking to hire are “a lingering pandemic that will not disappear overnight,” “reduced availability of retirees and parents,” and “a quicker-than-expected recovery in customer demand.”