U.S. Postal Service lost $8.5 billion in 2009

A weathered U.S. Postal Service sticker. The image and the words have nearly faded away.

Despite massive cuts, the U.S. Postal Service lost $8.5 billion in 2009. (Photo Credit: CC BY/Kevin Dooley/Flickr)

The number of people who claim to never use postal “snail mail” has increased tremendously as e-mail, text messaging, instant messaging and online social networking have all but extinguished the art of letter writing. Combine this with the boom in the commercial package service industry, and the financial implications for the U.S. Postal Service are grim, indeed. According to MSNBC, the Postal Service lost $8.5 billion in 2009 ($4.7 billion more than in 2008), despite cutting more than 100,000 jobs and reducing service.

Internet killed the Postal Service

Previous estimates by the U.S. Postal Service for 2009 were $6 billion to $7 billion. A sharp mail decline has resulted from more people relying on electronic communication, and the recession has stanched the flow of business mail. This has brought advertising down. In total, it translates to less money for the Postal Service. It’s no wonder USPS is pondering a postage rate increase and dropping Saturday service.

More cost savings than any other organization

In a statement, USPS CFO Joe Corbett remarked that the U.S. Postal Service managed to cut more than $9 billion, mostly by slashing about 105,000 full-time jobs. That is “more than any other organization, anywhere,” he said, and USPS will continue to focus on “efficiency.” Yet favorable legislation, regulation and labor contracts must follow if the organization is to continue to exist.

Labor contracts are currently being negotiated between the USPS and its unions. These negotiations are expected to continue into 2011.

First-class mail has declined significantly

The volume of personal letters and cards that pass through USPS hands has decreased, as have bill payments. Online paperless billing has played a significant role in the latter problem. Overall, first-class mail has dropped 6.6 percent in 2010, 8.6 percent last year and 4.8 the previous year. Considering that first-class mail traditionally constitutes more than 50 percent of USPS revenue, the problem is apparent.

So long as retailers and creditors grant consumers discounts for paperless billing – a practice that is unlikely to change – USPS will have an uphill battle. Considering that Netflix customers are shifting toward using the movie distributor’s streaming service more than DVD exchange through postal mail, it seems that only a miraculous act of Congress (read: higher taxes) can save the U.S. Postal Service.

Sources

MSNBC

A long, painful death

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