On Capitol Hill, Democrat and Republican leaders find themselves entangled in a high-stakes game of political chess. The prize? The future of the United States Postal Service. As USPS burns through cash, the question of how to save it has long been up for debate in Washington. Democrats argue the Postal Service’s low rates and promise of universal service are too essential to give up, while the majority of Republicans argue for privatization (which we fundamentally believe is the wrong move). In recent months, COVID-19 has put even more of a spotlight on USPS and its place in American society. It’s indisputable that the Coronavirus pandemic and resulting recession has battered industries across the world. However, the dark cloud hanging over the global economy contains a hint of silver lining. Thanks to rising eCommerce orders and package volume, COVID-19 has actually given USPS a slightly longer runway to stay operational.
USPS is the Number One Essential Organization During the Coronavirus Pandemic
While other industries have suffered (or even shuttered) over the past few months, the Coronavirus pandemic has proven just how essential the Postal Service is to the American economy. As the nation sheltered in place and largely entered into a period of isolation, USPS banded the country together by continuing to deliver mail and packages. Both businesses and individuals have relied on USPS package services to send goods back and forth such as groceries, retail items, and more. In fact, a recent study done by the Harris Poll shows that Americans believe USPS to be the number one essential organization during the pandemic.
Below is the full list of the 100 most essential organizations during COVID-19, provided by the Harris Poll.
Considering Americans’ current viewpoint, more citizens have turned to the Postal Service in recent months than ever before. It’s no wonder, then, that the Coronavirus pandemic has presented USPS with a unique opportunity to stay afloat while other industries flounder.
Mail Volumes Haven’t Dipped as Far as USPS Originally Projected, and Package Volume Has Exploded
In addition to being deemed the most essential organization in recent months, another reason for the Postal Service’s second wind is a less-than-expected decline in mail volume. When the pandemic first hit, USPS insiders were worried that it would only quicken the organization’s impending downfall. After all, mail volumes dipped drastically in March and April. This, in turn, resulted in a huge blow to the Postal Service’s revenue. Mailing services are the organization’s largest source of revenue, and the financial buoy on which USPS relies to stay afloat.
That said, mail volume hasn’t proved to fall as much as analysts originally projected. As states slowly reopen, marketing and business mail volumes have picked up again. However, this steady pickup in mail volume isn’t the main reason USPS can enjoy a few more months of runway. Unquestionably, the biggest shot in the arm that USPS has gotten from the pandemic is the rise in package volume.
eCommerce Packages are Keeping USPS from Financial Ruin
Interestingly enough, eCommerce orders have exploded despite the pandemic. As a result, USPS has seen a “tidal wave” of new packages being injected into their network. It doesn’t just stop with longer-than-normal lines outside of the local Post Office. Private USPS partners such as shipping software companies like Pirate Ship, ShipStation, and Shippo have all seen exponential growth in user signups and daily transactions for shipping labels.
As more Americans turned to online shopping for essential and non-essential goods, USPS and other shipping carriers began to experience unprecedented growth in package volume. In fact, package volume for USPS increased 80.5% year-over-year at its peak on May 17th. This surge occurred in just two months between March and May, as seen in the chart below:
While mail is still the Postal Service’s largest source of revenue, package services are the organization’s fastest revenue driver. As seen in the chart above, COVID-19 has only accelerated package growth for USPS. This sharp increase in packages has, in turn, helped prop up the Postal Service’s finances—at least for the time being.
USPS Still Needs Major Congressional Help
Despite the financial benefits the Postal Service has received from the Coronavirus package spike, the organization still needs help. Rising package volume is not simply enough to place USPS back on the road to financial stability. The Postal Service requires financial aid from the government, and fast.
Most don’t realize that, at its core, the Postal Service is not a failing business. The real reason USPS has lost billions of dollars since 2007 is because of specific legislation that Congress enacted in 2006. This legislation required USPS to “pre-fund” future employees’ health and retirement benefits up to 70 years in the future. The Congressional mandate placed an impossible financial burden on USPS, and caused the organization to rack up nearly $161 billion in debt as it defaulted on these payments in an effort to keep enough cash on hand to stay operational for the American people.
Due to this near-insurmountable level of debt, postal insiders expected USPS to run out of cash as early as September. Even as the recent surge in package volume has provided some immediate relief and extended this timeline, without aid from Congress and the Senate, USPS still faces insolvency…putting the millions of small businesses and individuals that rely on the Postal Service every day in jeopardy, as well as the American economy at large.