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Employee Levels At U.S. Class I Rail Operations Drop

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The U.S. operations of the Class I railroads had fewer employees on their company rosters in July, continuing a downward trend that has been going on for years.

In mid-July, headcount totaled 140,703 employees at U.S. Class I rail operations, according to data compiled by the Surface Transportation Board. U.S. rail headcount fell 4.6 percent from July 2018, and nearly 0.5 percent from June 2019.

The headcount of train and engine employees totaled 59,291 workers in mid-July, a 4.2 percent drop from July 2018. July's numbers for train and engine employees was nearly flat with June, shedding only 0.1 percent, or 72 employees month-over-month. The headcount for train and engine employees can be significant because it can signal the level of train crews that the railroads think they need to keep network capacity at an adequate level.

The totals for both categories are the lowest so far for 2019. Overall employee levels have dropped in 2019 as Norfolk Southern (NYSE: NSC), Union Pacific (NYSE: UNP) and Kansas City Southern (NYSE: KSU) joined CSX (NYSE: CSX), Canadian National (NYSE: CNI) and Canadian Pacific (NYSE: CP) in adopting precision scheduled railroading (PSR), an operational model that seeks to streamline operations and run trains on a fixed schedule.

The railroads also traditionally seek to match resources, including train crews, with anticipated capacity needs, and U.S. rail volumes year-to-date have been sluggish in 2019.

"When volumes get softer, we know how to adjust our resources to match what volume represents," said UNP chief executive officer Lance Fritz during his company's second quarter earnings call on July 18. Fritz also said his company's adoption of PSR was a key contributor to UNP's year-over-year drop in headcount.

Fritz continued, "We've taken a lot of work out of the network and it's being reflected now in our manpower."

The Class I railroads said last month that they will continue to look at headcount levels, with some companies continuing to pursue cuts as they implement PSR.

"We aren't guiding to a specific headcount number, but as I mentioned previously, we do expect that headcount is going to continue to come down as we reduce work associated with TOP21 [NSC's version of PSR]," said NSC chief financial officer Cindy Earhart during her company second quarter earnings call in July. "We're going to be looking at all areas of the company – mechanical, G&A [general and administrative] – all of those areas as we continue to push on the productivity."

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