Jan 4, 2020 - Economy & Business

Railroads cut workers as industry automates, implements cost-cutting strategies

Railroad in a manufacturing city

Photo: Spencer Platt/Getty Images

More than 20,000 workers in the railroad industry lost jobs this past year, even as the U.S. economy continued its streak of moderate growth, the Washington Post reports.

Why it matters: Those numbers represent the biggest round of layoffs in the sector since the Great Recession — nearly a 10% drop in rail employment, per Labor Department data. Changes in the rail industry highlight signs of "ongoing pain" in the industrial sector, threatening middle-class jobs, the Post writes.

  • Some economists say American railways are enduring a "freight recession," with volumes dramatically dropping last year, notes the Post.

The state of play: President Trump's trade war has impacted U.S. agriculture and manufacturing, which in turn lowered demand for railroads to move products. The decline is also a result of the U.S. becoming less dependent on coal.

Yes, but: Railroad stocks soared after industry executives integrated automation and cost-cutting strategies to maintain profitability, "doubling down on the idea that rail's future entails longer, faster trains and fewer workers," per the Post.

  • Employment losses are expanding thanks to a technique called Precision Scheduled Railroading (PSR), which efficiently directs rail traffic.
  • Some on Wall Street view these shifts as a model for other industries during tough times. Norfolk Southern and Union Pacific stocks jumped 30% last year, according to the Post.

Worth noting: Rail industry leaders remain optimistic as Trump looks to finalize the U.S.-Mexico-Canada Agreement (USMCA), as well as a trade deal with China.

The bottom line: Freight declines have previously foreshadowed economic slumps "because they’re a barometer of how much stuff is heading to market," the Post writes.

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