June 25, 2020

We now have two months of data on the impact of Covid-19 on the Postal Service.  We compare April and May each to the same months in 2019 to see the pandemic impact on USPS results.  There are other factors mixed in, but the massive impacts of the crisis outweigh them.

Comparing May to April, there are improvements in Marketing Mail volume and revenue, total Mail volume, Packages volume and revenue, and total volume and revenue.  The reduction in work hours has diminished, and the increase in salaries and benefits has improved.

USPS Changes Compared to the Same Month in 2019 (red=worse, green=better)

                                  April 2020                                 May 2020

                                   Vol            Rev                              Vol                Rev

First Class            -8.9%      -8.1%                            -13.9%          -12.0%

Periodicals          -17.7%      -18.4%                         -18.1%          -20.4%

Marketing           -45.o%      -45.7%                         -40.6%         -41.2%

Mail                     -29.4%      -22.4%                        -28.8%         -22.9%

Packages            +34.9%     +38%                              +61.2%        +55.6%

Total                    -27.2%      -3.8%                           -25.4%          +3.3%

Work Hours                  -3.1%                                              -1.0%

Salaries & Benefits     +3.4%                                            +2.8%

We suggested last month that removing the large, non-cash accounting adjustment for workers’ compensation gives a better picture of the USPS bottom line.  Removing the WC adjustments, the USPS net got worse by $470 million in April 2020 versus April 2019.

The change became much better in May.  Postal Service net results diminished by only $86 million in May 2020 versus May 2019.  The main reason is that revenue increased by $180 million this May after declining by $234 million in April.  Expenses without the WC adjustment rose only slightly more in May than they did in April, by $30 million.

Still, USPS expenses without the WC adjustment grew faster at 4.1 percent than revenue did at 3.1 percent. That’s why USPS lost $651 million last month after removal of the WC adjustment.

USPS Results for April and May Compared to Prior Year w/o WC Adjustment

$millions         April 2020                         April 2019

Rev                       5,690                                    5,924                     -234            -3.9%

Exp                       6,891                                    6,262                    +629            +10.1%

Net                       (1,201)                                   (338)                    -863

Exp w/o WC       6,676                                     6,440                   +236            +3.7%

Net w/o WC        (986)                                     (516)                    -470

$millions         May 2020                         May 2019

Rev                       6,028                                   5,848                    +180            +3.1%

Exp                       6,252                                   7,063                     -811            -11.5%

Net                        (225)                                  (1,215)                    +990

Exp w/o WC       6,679                                    6,413                   +266            +4.1%

Net w/o WC        (651)                                     (565)                     -86

The 61.3 percent increase in Package volume and 55.6 percent increase in Package revenue are having a positive affect on USPS finances.  In their recently revised forecasts, however, the Postal Service assumes that Package volume reverts either to its pre-Covid-19 level, or in the optimistic case, to 15 percent above pre-Covid-19.  Either would be quite a drop from up 61.3 percent.