USPS News

After posting losses in all four quarters of the previous Fiscal Year, the first quarter of FY 2021 shows income of $727,000,000.

The usual reports of USPS’ quarterly financials include a large loss, often in the billions, despite a significant revenue stream. The reason revolves around a 2006 law that mandates USPS pre-fund some of its employee benefits to cover over five decades into the future, and that’s still a huge issue that could possibly lead to the agency’s collapse. The US Postmaster General, Louis DeJoy, recently commented, “We still face systematic imbalances.”

For the first quarter of the 2021 Fiscal Year (October – December 2020), however, the USPS posted an income of $727 million. Through most of the calendar year of 2020, the Coronavirus pandemic put increased pressure on mail delivery as e-commerce and package delivery surged with people shopping and working from home. But from March to September, the mail service still reported losses: $4.5 billion in the 2nd quarter, $2.2 billion in the 3rd, and $2.2 billion for July to September 2020.

Holidays, Elections, and COVID-19

What made the first quarter of FY 2021 different was the quantity of mail further intensified during these months due to not only the reasons above that were caused by the Coronavirus, but the additional impact of holiday shopping and an election where mail-in voting numbers skyrocketed. The increase of mail-in ballots was a direct effect from COVID-19, but it was also an intense election where many campaigns were mailing out political ads to voters. USPS reported 2.7 billion pieces of election mail, including ads and ballots, were delivered through the Postal Service in 2020.

And where holiday shopping has helped alleviate some of the loss for the USPS in the past, 2020 was an outlier. The pandemic, through a massive uptick in online shopping, meant the holidays added even more to the volume of mail going through the country’s postal system. When comparing the $387 million loss from October - December 2019 to the $727 million income gained a year later, the difference between is $1.1 billion. Package volume grew 25% from the same time last year, and revenue from package delivery went up 11.1% to $2.8 billion total.

Of course, it was not only revenue that increased, but also costs. Due to employees getting sick or quarantined, coupled with the rising demand for mail service, the cost of USPS worker benefits rose $771 million since February 2020. Sick leave and overtime pay caused the largest dents. Transportation costs spiked $204 million in the same timeframe. The future of the Postal Service remains uncertain, but with President Biden nominating 3 people to fill openings on the USPS Board of Governors last week, signs of what is to come for the mail service are perhaps on the horizon.

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Until Next Time,

 

Benefits Ben, STWS

**Written by Benjamin Derge, Financial Planner. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.

USPS News

USPS News