FedEx labor crunch gut punch to economic recovery

FedEx's labor shortage is having dire consequence's along the company's supply chain. 

A shortage of truck drivers, package handlers and other workers are resulting in longer delivery times and higher costs for American companies who are then raising prices on U.S. consumers. 

Constrained labor markets are causing "widespread inefficiencies in our operations," said FedEx Chief Operating Officer Rajesh Subramaniam, who noted worker shortages had a $450 million impact on the company’s quarterly results.  

FedEx’s Ground network is rerouting more than 600,000 packages per day due to difficulty finding workers. 

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The company’s ground operation in Portland, Oregon, for example, has 65% of the staffing needed to handle normal package volumes, Subramaniam said. As a result, it cannot efficiently process the normal package load and must divert 25% of the volume that would normally flow through the facility, leading to longer delivery times and higher costs as the company must use more third-party transportation. 

The staffing problems are occurring despite FedEx paying package handlers at its ground division an hourly rate that is 16% more than previously. The company’s express division is paying an hourly rate 25% above previous levels. 

FedEx declined to offer FOX Business specifics on wages for ground and express as pay depends on market and job function.

Rival UPS is having similar difficulty in finding workers. 

"This is definitely one of the tightest labor markets we’ve seen," UPS Spokesman Dan McMackin told FOX Business.

Together, FedEx and UPS transport about 14% of U.S. gross domestic product.

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Worker shortages are also plaguing Costco Wholesale Corp. which on Thursday announced plans to limit purchases of paper goods, water and other household items due to supply-chain problems. 

Sneaker giant Nike Inc. also said on Thursday that labor shortages were resulting in higher transit times. 

"The speed and intensity of this downturn – and the rapidity of the recovery in many areas – are without modern precedent," said Federal Reserve Chairman Jerome Powell at his press conference on Wednesday. 

There were a record 10.934 million job openings in July, according to the Labor Department’s most recent Job Opening and Labor Turnover Survey, or JOLTS.

There is no better time than now for companies like FedEx and UPS to find workers amid concerns the ongoing supply-chain problems will result in product shortages as the holidays draw near. 

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Ahead of the holiday season, FedEx has unveiled plans to hire 90,000 frontline workers, hoping to lure them with perks like targeted pay premiums and increased tuition reimbursement. 

UPS wants to hire more than 100,000 workers for the holiday season, many of whom will receive a job offer within 30 minutes of applying in an effort to prevent them from going elsewhere.