It's not typical, however, for a company to eventually realize it needs workers more than it thought it did. That's because employees look like they're the expense that would be missed the least. Workers are often the first to be put on the chopping block when a company is looking to lower costs. It's a problem for all interested parties, but it's particularly an issue for shareholders who have enjoyed watching the railroad's profit margin expand in recent years.
The company may not even know what its optimal headcount is right now. Making the matter even more complicated is how Union Pacific is already understaffed relative to its pre-COVID-19 employment levels. Employee compensation is the railroad industry's single biggest operating expense, after all, accounting for roughly a third of most carriers' operational costs. If this an omen of what's to come, it may well mean a hiring freeze is in order.
Then last quarter's total freight tonnage fell for the second quarter in a row, reaching a two-year low as a result.
Like so many other organizations at the time, back in 2021, the railroad recognized it didn't have enough employees to handle rekindled demand coming out of the pandemic. Union Pacific ( UNP 0.89%) is in a sticky wicket.
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