Graphic Media Alliance

02/06/2024

Mailers Hub January Summary

Source: Mailers Hub, January 31, 2024

“Adders” Driving April Price Increase

Even though the most recent Postal Service price increase took effect in mid-January, according to its own announced schedule the agency will be filing for another semi-annual rate increase in early April, to be implemented in July.

Postmaster General Louis DeJoy has committed to the twice-a-year schedule until the USPS breaks even financially. Given the $6.5 billion loss in Fiscal Year 2023, the planned $6.3 billion loss in FY 2024, and the underwhelming financial results so far in FY 2024, “break even” is ever more elusive.

Five factors will contribute to the size of the next increase: the CPI (calculated by the Bureau of Labor Statistics); any remaining rate authority left over from the October 2023 filing; and the three “adders” authorized by the Postal Regulatory Commission in November 2020 (“density,” “retirement,” and “non-compensatory”).

November Financials: Mediocre Early Holiday Season Results

As the opening month of the holiday season, November should be better than preceding months, building to what should be the best month of the year for USPS volume and revenue. Instead, November 2023 followed familiar trends of volume and revenue less than they were planned to be. Volume for the four market-dominant classes was lower – again – while competitive product volume, which, according to the PMG’s 10-Year Plan, is expected to grow as a source of volume and revenue, was up less than planned. Total revenue was 1.0% less than planned, while expenses exceeded plan by 8.9%, driven by an $782 million unfavorable swing in the workers’ comp liability. The result was a net loss for the month of $1.110 billion, wiping away the small surplus in October, and yielding a $1.017 billion loss for the year to date – after only two months.

Total market-dominant mail volume was down 8.7% compared to the same month in 2022. First-Class Mail volume fell by 5.2% but Marketing Mail more than doubled that, down 11.1% compared to November 2022.  Meanwhile, competitive products volume was up 5.6%. Total USPS volume was 10.114 billion pieces, down 7.9% from 2022.

Data Reveals Worsening Service

Despite regular claims of “steady” service, the Postal Service’s own data shows that the only steadiness of service is in its worsening.

Though the agency has granular service performance data, by weeks and months if not days; by geographic area if not by ZIP Code and processing facility; and by specific products within the classes of mail, what it chooses to share publicly is homogenized to mask when, where, and for what mail service is the worst. The weekly press releases it’s been issuing since 2021 are an example of such statistical blending.

USPS to PRC: MYOB

It’s understandable that there should be a natural tension between a regulator and the regulated, and that’s always been the case between the Postal Regulatory Commission and the Postal Service. Even so, there would be periodic briefings and discussions, and the relationship was civil. However, under Postmaster General Louis DeJoy, that relationship, at least from the Postal Service’s side, has become adversarial, confrontational, and anything but civil.

DeJoy has been outspoken in his dislike for the PRC, considering it unnecessary and an impediment to the advancement of his agenda. Not a fan of operational transparency, DeJoy resents when someone tries to learn more about what the USPS is doing than he wants to reveal – which is usually nothing – and that applies especially to the PRC.

Do More Contracts Mean More Packages? – Analysis

A key element of Postmaster General Louis DeJoy’s 10-Year Plan is the growth of the agency’s package volume and revenue to offset the decline of traditional hard-copy mail. To do so, the USPS has been tweaking its package products to simplify them and align them to what’s offered by competitors in the marketplace.

Data about new competitive product contracts during the last three months of calendar 2023 (Postal Quarter 1 of the 2024 fiscal year) suggests that the Postal Service may be making some headway, or at least had a good quarter. The number of competitive product contracts that were approved by the Postal Regulatory Commission, based on data from the PRC’s website, shows that, in PQI/FY 2024, 136 new contracts were approved – the same as for all of FY 2021 – compared to 105 over the same period a year earlier.

View the full January Summary