Don’t look now, but the post office just turned a profit

posted at 4:41 pm on February 10, 2016 by Jazz Shaw

This is something akin to seeing a Pegasus in your horse stable one morning. I’d assumed that this was pretty much never going to happen again, but against all odds the United States Postal Service has recorded a profit. And no.. this is not an article from The Onion. (Government Executive)

The U.S. Postal Service turned a profit in a financial quarter for the first time in five years, though President Obama still proposed the agency slash 12,000 employees in his fiscal 2017 budget.

USPS posted a net income of $307 million in the first quarter of fiscal 2016, the first such gain since the fourth quarter of fiscal 2011. Profits grew $1.1 billion over the same period last year, when the Postal Service lost $754 million. Operating revenue ticked up 3.3 percent to $19.3 billion between Oct. 1 and Dec. 31, 2015, driven largely by a record volume of package delivery.

As noted, the increase is almost entirely due to package delivery. In terms of mail service by private citizens, that’s pretty much a given I suppose. The days when the post was the primary conveyor of intellectual goods (i.e. “letters”) is pretty much over and we shouldn’t expect to see it come back unless an EMP knocks out the grid for a few years. (And even then, stamps will probably be hard to come by.) Bulk mailings and junk mail aren’t all that profitable. But packages can’t be sent in an email – yet – so that’s where the money is in this business.

The USPS isn’t without competition so how did they climb back into the black? Newsweek noted back in November that they were starting to get their head above water but more work remained.

It’s also true that the Postal Service faces challenges; albeit not as often pictured. The major one has nothing to do with the mail and everything to do with congressional politics.

In 2006, a lame-duck Congress mandated that the Postal Service pre-fund retiree health benefits. No other agency or company in the country has to pre-fund for even one year; the Postal Service must pre-fund 75 years’ worth of these benefits in advance. That $5.6 billion annual charge is the “red ink.”

Without this unique and unfair burden, the narrative would be as follows: Here’s a government entity that, with no taxpayer money, and faced with a still soft economy plus the growing reach of the Internet, once again earned a billion dollar-plus operating profit.

It’s our old friend, mandatory, baked in retirement plans and benefits which swamp any profits which the business might take in even if it were run in the most efficient manner possible. Congress could probably step in and ease some of that burden but then they’d be taking on the unions along with a few other headwinds. Does that sound likely to happen in an election year? This brief spasm of profitability is based largely on a somewhat stronger economy, with more people buying and shipping things. All it would take is another even modest downturn in the economy and the USPS would be right back in the red.

This calls for some cool headed thinking, a rational plan and some consensus in Congress on a path toward a solution. In other words: the Post Office is pretty much screwed.

US Post Office


Related Posts:

Breaking on Hot Air

Blowback

Trackbacks/Pings

Trackback URL

Comments

Don’t know about you folks but I’m getting more junk mail than I’ve ever gotten. That’s probably why.

AYNBLAND on February 10, 2016 at 4:43 PM

If the FAA ever allows delivery by drone, good-bye (and good riddance) USPS.

Which is why they won’t ever do that.

Steve Eggleston on February 10, 2016 at 4:43 PM

AMAZON

jake-the-goose on February 10, 2016 at 4:43 PM

Also, the “unique and ‘unfair'” pre-funding of pension liabilities is mandated by the government for private enterprise.

Steve Eggleston on February 10, 2016 at 4:45 PM

Must be from whoever is paying them to stuff all that worthless junk mail into my box.
95% of what’s in my mailbox is unwanted and goes straight in the trash.

dentarthurdent on February 10, 2016 at 4:45 PM

USPS handled 40 percent of Amazon’s volume last year—or almost 150 million items—more than either United Parcel Service or FedEx. He figures that Amazon pays the USPS $2 per package, which is about half what it would pay UPS and FedEx.

jake-the-goose on February 10, 2016 at 4:46 PM

My neighborhood has community mail boxes. A couple of weeks ago, vandals pried open almost all the individual boxes on not only my box, but several others around the neighborhood. the post office came and removed the damaged units. We haven’t seen them again, and have to drive to the main post office to pick up our mail. So, yeah, I imagine they’re saving a lot of money, you know, NOT delivering the mail.

SailorMark on February 10, 2016 at 4:47 PM

So, as long as people order crap they can’t afford we will OK.

Oil Can on February 10, 2016 at 4:47 PM

They’ve removed all the mail boxes in my neighborhood. Closest one is now a half mile away.

Blake on February 10, 2016 at 4:48 PM

Several of the packages I ordered for Christmas came via the USPS. I don’t recall any of my packages the previous year being USPS deliveries.

BacaDog on February 10, 2016 at 4:49 PM

In 2006, a lame-duck Congress mandated that the Postal Service pre-fund retiree health benefits. No other agency or company in the country has to pre-fund for even one year; the Postal Service must pre-fund 75 years’ worth of these benefits in advance. That $5.6 billion annual charge is the “red ink.”

Every dollar USPS spends now on pre-funding retiree health benefits is a dollar that they won’t have to spend on retiree health benefits 20 or 30 years down the road. I wish other government agencies were required to be as responsible in funding retiree health benefits as USPS has to be.

J.S.K. on February 10, 2016 at 4:49 PM

I have to empty my PO box of junk mail twice a week or my legit mail gets held by the post office and I have to go while the window is open to get it.

Note that they NEVER hold junk mail from my box, just the first class stuff.

ConstantineXI on February 10, 2016 at 4:49 PM

jake-the-goose on February 10, 2016 at 4:46 PM

Didn’t see your post. That explains quite a bit.

BacaDog on February 10, 2016 at 4:49 PM

BTW – as long as we’re talking junk mail, spam, fraud…. – be extra careful of the IRS phone scam going around – just took a nasty turn here in Colorado Springs the other day when the IRS scammers turned it into a full blown SWATting call against their intended victim when he blew them off.

dentarthurdent on February 10, 2016 at 4:50 PM

This is great news for John Kasich!

Paperclips on February 10, 2016 at 4:51 PM

It’s our old friend, mandatory, baked in retirement plans and benefits which swamp any profits which the business might take in even if it were run in the most efficient manner possible. Congress could probably step in and ease some of that burden but then they’d be taking on the unions along with a few other headwinds.

Ummm… unless I’m missing something here, we *want* our government agencies to do what the Post Office has to do now. The other way is to let agencies keep retirement benefits off-book, which in practice means they go up and up and up because nobody ever has to account for them.

If every government program, local, state, or federal, had to budget their benefits 75 years out, we’d have a MUCH cheaper government.

DaveatGarfieldRidge on February 10, 2016 at 4:52 PM

Don’t FedEx and UPS contract out to the post office to deliver some packages?

Fallon on February 10, 2016 at 5:05 PM

Funny, it almost coincides with the recent move by the post office, they now deliver packages for UPS. I wonder how much impact that had? UPS should just take over USPS.

Sven on February 10, 2016 at 5:05 PM

This is great news for John Kasich!

Paperclips on February 10, 2016 at 4:51 PM

Heh.
His dad told him to get a government job, and he did. Although I’m sure dad’s pension was not as good as juniors’ will be.

leftamark on February 10, 2016 at 5:07 PM

There are also agreements with UPS that transfers small packages to local USPS for delivery. Just about any little mailbox sized item coming directly from China comes by USPS. A couple of weeks back I had an Amazon order that tracked to delivery on a Sunday. The postman delivered it on Saturday. He said that all this package delivery has fairly well extinguished the discussion about 2 or day a week/no weekend delivery schemes to save money that were the rage not long ago.

ironked on February 10, 2016 at 5:08 PM

Don’t look now, but the post office just turned a profit

My a**. Seriously, I don’t believe that for one second.

Don’t FedEx and UPS contract out to the post office to deliver some packages?

Fallon on February 10, 2016 at 5:05 PM

And every time the final delivery on my Prime two-day package is by USPS it is late.

M240H on February 10, 2016 at 5:10 PM

Are they covering their pension contributions? If not, then they did not make a profit.

Occams Stubble on February 10, 2016 at 5:12 PM

So remind me again why we need the government to handle mail + shipping when any number of private entities can do it?

It makes as much sense as if we had government run gas stations.

Free Indeed on February 10, 2016 at 5:13 PM

Personally, I’m not surprised at all that they made a profit. Ever since the back door bailout called “Smart Post” was introduced and they started taking a cut of UPS and FedEx income they were bound to show a profit. But it cost us, the consumer, the aggravation of vastly increased delivery times. I wonder what the government gave them in return for the bail out?

Certif on February 10, 2016 at 5:17 PM

No other agency or company in the country has to pre-fund for even one year; the Postal Service must pre-fund 75 years’ worth of these benefits in advance. That $5.6 billion annual charge is the “red ink.”

And no other Federal Government Agency fully pays for it’s employees rather generous retirement benefits without utilizing Social Security and/or some form of matching contributions.

The Federal government moved away from defined pension benefits in 1986 (CSRS) and switched to (FERS) small employee matching plans backed up by Agency match 4011(k) plans along with Social Security.

Johnnyreb on February 10, 2016 at 5:17 PM

Funny thing. If I mail something from the suburbs to the city of Chicago, I need to factor in five to seven days for it to be delivered. (That’s a little over 35 miles…)

Fallon on February 10, 2016 at 5:17 PM

So is this after the deficit years were paid back, or are we just going to forget those millions ….

Whiterock on February 10, 2016 at 5:19 PM

This is something akin to seeing a Pegasus in your horse stable one morning. I’d assumed that this was pretty much never going to happen again, but against all odds the United States Postal Service has recorded a profit.

.
When I started getting Amazon deliveries on Sunday … I knew someone running USPS had finally figured out how to make money.

The ONLY level of delivery I recommend people avoid like the plague with regard to USPS is any third party saying they ship “USPS Value Shipping” …

… which is where the Postal Service shows they don’t have the level of apps Fedex and UPS do – live in Indianapolis and order something from a Chicago seller –> your package may go and spend a week in Butte, Montana before ti heads anywhere in your direction.

Everyone wishing the USPS to disappear is going to learn just how DUMB an idea that really is when the huge volume the Postal Service handles ends up being a HUGE profit for the other carriers because they won’t deliver millions of packages they would lose money on.

PolAgnostic on February 10, 2016 at 5:24 PM

Kasich=

GOPe-mail

Senator Philip Bluster on February 10, 2016 at 5:26 PM

Glad I was sitting down.

Every dollar USPS spends now on pre-funding retiree health benefits is a dollar that they won’t have to spend on retiree health benefits 20 or 30 years down the road. I wish other government agencies were required to be as responsible in funding retiree health benefits as USPS has to be.

J.S.K. on February 10, 2016 at 4:49 PM

What you said.

rbj on February 10, 2016 at 5:27 PM

I have to empty my PO box of junk mail twice a week or my legit mail gets held by the post office and I have to go while the window is open to get it.

Note that they NEVER hold junk mail from my box, just the first class stuff.

ConstantineXI on February 10, 2016 at 4:49 PM

There is no way that they are only sorting junk to your box and then separately ‘pulling’ your first class to be held.

BierManVA on February 10, 2016 at 5:32 PM

Another reason the USPS became profitable is that they are a sub-contractor for UPS to deliver to homes.

Neitherleftorright on February 10, 2016 at 5:34 PM

And every time the final delivery on my Prime two-day package is by USPS it is late.

M240H on February 10, 2016 at 5:10 PM

You can blame Fedex or UPS then, not the USPS. USPS packages delivered by them go out the next day. Always. If Fedex or UPS drop in the late morning or afternoon AFTER the carrier leaves, it’s not USPS fault.

BierManVA on February 10, 2016 at 5:38 PM

BierManVA on February 10, 2016 at 5:32 PM
BierManVA on February 10, 2016 at 5:38 PM

Do work for USPS?
Just curious – I’m seeing a trend in your comments……

dentarthurdent on February 10, 2016 at 5:40 PM

ALL our Amazon packages arrive via UPS and maybe a couple by FedEx. So not making any money on our house.

I think Mr. Trump needs to add this to his list of things to fix. I mean, what’s the point of 75 years of prepaid health benefits when Trump is going to replace Obamacare with something “much better”?

TeaTrekkie on February 10, 2016 at 5:40 PM

300 million? Congress can blow that while they pull their pants up from banging an intern.

trigon on February 10, 2016 at 5:55 PM

Don’t FedEx and UPS contract out to the post office to deliver some packages?

Fallon on February 10, 2016 at 5:05 PM

Yes, I’m rural and that is common. I’m not a fan because if FedEx or UPS delivers it, they do it to my front door. If the Post Office delivers it’s to my oversize mailbox in a cluster almost a quarter mile away and much more vulnerable to theft.

RockyMtnGirl on February 10, 2016 at 6:07 PM

The Federal government moved away from defined pension benefits in 1986 (CSRS) and switched to (FERS) small employee matching plans backed up by Agency match 4011(k) plans along with Social Security.

There is still a defined benefit component to FERS, it’s just not the entire benefit– the rest taken up by the Thrift Savings Plan and SS.

DaveatGarfieldRidge on February 10, 2016 at 6:16 PM

“Unfair prefunding burden”.

Otherwise known as commonsensical fiscal foresight.

orangemtl on February 10, 2016 at 6:36 PM

Hey biermanVA. Why do postal workers always drive like dogshiat?????

Indiana Jim on February 10, 2016 at 6:38 PM

Lol….You actually believe that the money being “set aside” for future pension payments by the USPS isn’t being treated as a slush fund by Congress?

I needed a good belly laugh!

Von Kleist on February 10, 2016 at 8:23 PM

Keep in mind that those are undoubtedly federal government numbers showing a profit. No one knows how real or how ‘cooked’ are the books.

RJL on February 10, 2016 at 9:07 PM

Now that the internet has made a huge dent in the letter and advertising income, USPS only has the competitive market in parcel delivery as a real revenue generator. Even with the advantage of government sponsorship, USPS just barely holds it’s own.

Random Numbers (Brian Epps) on February 10, 2016 at 9:09 PM

USPS handled 40 percent of Amazon’s volume last year—or almost 150 million items—more than either United Parcel Service or FedEx. He figures that Amazon pays the USPS $2 per package, which is about half what it would pay UPS and FedEx.
.
jake-the-goose on February 10, 2016 at 4:46 PM
.

Didn’t see your post. That explains quite a bit.
.
BacaDog on February 10, 2016 at 4:49 PM

.
That would explain a lot … and further, it implicates Amazon as a “money laundering” operation for the Postal Union.

listens2glenn on February 10, 2016 at 9:47 PM

I noticed that the mailman to our condo high rise was starting to deliver tons of Amazon packages. He said USPS had signed a big contract with Amazon.

PatJDooley on February 10, 2016 at 10:15 PM

Bezos should buy the Post Office.

PatJDooley on February 10, 2016 at 10:21 PM

This is entirely because fracking and the collapse in China have driven oil prices way down.

TallDave on February 11, 2016 at 5:11 AM

In my area rural delivery has changed 100% from carrier owned vehicles to USPS trucks. USPS is the final delivery choice for the bulk of both UPS and Fedex packages as well as USPS packages. It makes sense since USPS delivers once a day, except Sunday, to most people’s homes and businesses. As online shopping grows, their revenue will grow. There must have been some very high level meetings to arrange all this. UPS and the teamsters union lost out on this one.

Viator on February 11, 2016 at 9:41 AM

I call bullshit.

The most recent price increase for international mail, just announced this January, increased prices by roughly 35%. A basic “flat rate” envelope went from $23.95 to $32.95, just like that.

Oil prices have tanked, so no, that’s not an excuse. Inflation? You gotta be kidding.

But the pensions, they keep climbing and climbing. There’s an army of 50-ish USPS retirees who need to tank up their SUVS as they go off to their fishing cabins in the woods.

There’s yer “reason”, right there.

fulldroolcup on February 12, 2016 at 12:45 AM