The U.S. Postal Service (USPS) today posted a net loss for the year of $9.2 billion, about $363 million more than it lost in 2019, as it capped off a tumultuous fiscal year marked by the broad impact of the coronavirus pandemic and sharp criticism of policies enacted by new Postmaster General Louis DeJoy.
In announcing its results, the Postal Service described its past four quarters as a tale of two trends. USPS said the first half of the year was impacted by traditional long-term shifts away from first class mail in favor of e-commerce parcels, while the second half of the year was swamped by a magnified jump in parcel volumes fueled by online shopping activity during the Covid crisis.
In fact, that explosion of parcel volume made 2020 the first year that the nation’s post office recorded more revenue from delivering packages than from its traditional cash cow, first class mail, according to a review of USPS’ public financial records.
"There continues to be great uncertainty over the future impacts of the pandemic on the Postal Service," USPS Chief Financial Officer Joseph Corbett said in a release. "Given the lasting declines in mail that accompanied the 2007-2009 Great Recession, the Postal Service expects that the Covid-19 crisis may have similar effects on mail volume going forward and that it may never recover to its pre-pandemic levels. Further, while we do believe that our package volumes will remain higher given what looks to be a potential permanent shift in consumer behavior, we do not expect our package revenue growth over the medium-to-long term to make up for our losses in mail service revenue caused by Covid-19."
The other major factor affecting USPS operations in 2020 was the selection of former New Breed Logistics and XPO Logistics Inc. executive DeJoy to the top job, occurring during an administration when President Trump had frequently criticized USPS for not charging higher rates to e-commerce shippers like amazon.com. DeJoy took over on June 15 and promptly unveiled a modified organizational structure for the agency that he said was designed to reduce its cost base and capture new revenue.
However, since those changes arrived in the midst of a surge in mail-in ballots occurring during the nation’s first presidential election to take place during a pandemic, DeJoy quickly drew attention for a corresponding slowdown in mail delivery speed that affected ballots as well as paychecks, pharmaceuticals, and other crucial items. Under pressure from that political spotlight as well as pending legal cases, DeJoy has since rolled back or frozen some of those decisions, such as the removal of automated mail sorting machines and curbside drop boxes.
Based solely on the agency’s financial performance, the impact of that turbulent year was a rise in operating revenue to $73.1 billion, an increase of nearly $2.0 billion over last year, driven by a jump in shipping and packages revenue from $22.8 billion to $28.5 billion. In contrast, first class mail revenue in 2020 dropped from $24.4 billion to $23.8 billion, marketing mail dropped from $16.4 billion to $13.9 billion, international mail dropped from $2.5 billion to $2.4 billion, and periodicals revenue dropped from $3.9 billion to $3.5 billion.
Despite that overall increase, USPS’ expenses grew even faster, swelling by $2.3 billion to reach to $82.2 billion. According to USPS’ accounting books, the increased costs were due to larger compensation and benefits due to workforce additions necessary to address the pandemic surge in package volume, along with increased overtime hours and paid sick leave also stemming from the health crisis. In addition, transportation expenses grew by $630 million, primarily due to increased package volumes and the limited availability of commercial air transportation due to the pandemic, which necessitated shifts to higher-cost modes of transportation.
“2020 has been an extraordinary year for the Postal Service and the nation. Amid the tumult of the Covid-19 pandemic—and with the challenges of the election, disruptions in our workforce, rapid changes in our marketplace, and long-term financial distress—the 644,000 women and men of the Postal Service delivered for the American public,” DeJoy said in a release.
“We remain committed to our mission of service in every American community - delivering the medicine, supplies, benefit checks and important correspondence the public depends upon,” said DeJoy. “We are likewise committed to addressing our significant financial imbalances—which were exacerbated by Covid this year and will cause lasting impacts—through a combination of management actions and legislative and regulatory reforms.”
