Is FedEx the Canary in the Coalmine?

FedEx released its earnings last week.  The stock went down as a result of an earnings miss and a disappointing outlook.  From the press release:

First quarter operating results were negatively affected by an estimated $450 million year over year increase in costs due to a constrained labor market which impacted labor availability, resulting in network inefficiencies, higher wage rates, and increased purchased transportation expenses. This was partially offset by higher package and freight yields, increased international export express shipments and a favorable net fuel impact. In addition, while commercial ground and U.S. domestic express package volume increased year over year, continued supply chain disruptions have slowed U.S. domestic parcel demand compared to the company’s earlier forecast. (Emphasis added.)

For more comments about the labor market and supply chain challenges, I encourage you to read the rest of the press release linked here.  You can read about FedEx’s price increase and additional surcharge.

Those of us that do not work for the Federal Reserve have been experiencing labor challenges and supply chain disruptions daily for months.  At some point, a lack of people to fill jobs and a lack of goods to buy will create an economic slowdown.  If that plays out, companies will be paying more to attract workers (rising wages =  good, lower profits = bad), consumers will be paying more for everything  (inflation = bad), and interest rates are still around zero so the Federal Reserve does not have a lot of leeway to cut interest rates.  Oh, and the knuckleheads in congress are talking about a massive tax increase. 

Buckle up.  The next few quarters are going to be a little bumpy.  Remember, chaos creates opportunity.  There are going to be a lot of opportunities to improve your business in the next few months.  Get ready!

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