The news this morning on the jobs front was not good: 533,000 jobs were eliminated in the US in November, the largest monthly job loss total since December 1974.  The unemployment rate is 6.7 percent, still low compared to previous recessions, but the percentage keeps climbing and could reach double digits if conditions worsen for the automotive industry.

There were a couple of other significant developments this week on the labor front.  First, the United Auto Workers (UAW) agreed to renegotiate labor contracts with the Big Three US carmakers, who are currently asking Congress (and taxpayers) for a $34 billion bailout.  In the logistics industry, YRC Worldwide is working with the Teamsters to modify their labor agreements.  Specifically, YRC Worldwide is requesting a 10 percent reduction in all wages paid, inclusive of scheduled increases, as well as the suspension of Cost of Living Adjustments (COLA).  In return, Teamsters employees would receive a 15 percent ownership stake in YRC Worldwide.

A couple of months ago, prior to the US presidential election, I wrote a posting on the Employee Free Choice Act (EFCA).  You can read the post for more details, but in a nutshell, if EFCA passes once Obama takes office and the new Congress is seated, the general consensus (fear for some, hope for others) is that more companies will become unionized in the future.  Like renegotiating NAFTA, this may be a campaign promise that gets placed on the backburner until economic conditions improve.  Or maybe the unions and its supporters will use the concessions the UAW and Teamsters are making to strengthen their push for passing EFCA sooner rather than later.  Time will tell.

What does this mean for the logistics industry?  The YRC-Teamsters agreement (still to be voted on) could lead to similar “renegotiations” at other unionized logistics companies.  It at least sets a precedent.  From a broader perspective, addressing labor issues will become a priority for many companies.  The headlines today are about layoffs, but the long term challenge is finding enough people, with the right set of skills, for the right types of jobs (i.e., jobs that will drive GDP growth in the years ahead).  In transportation, nobody is talking about driver shortages today, but the problem hasn’t gone away; it’s just that fewer trucks are on the road at the moment.  When the economy rebounds, where are the drivers going to come from?

As always, companies will strive to do “more with less” and this is where technology will play a key role.  For example, I expect demand for labor management system to grow.  A recent article in the Wall Street Journal (“Stores Count Seconds To Trim Labor Costs”) highlights how retailers like Meijer are implementing LMS to improve their store productivity and reduce labor costs.  Earlier this year, my colleague Steve Banker wrote a report (accessible to ARC clients) on how to turn warehouse pickers into knowledge workers.  He highlighted a regional grocer that is using speech recognition systems and wearable terminals (the Motorola WT400) at their distribution centers.  Demand for these types of technologies could also increase in the years ahead.  Of course, as I wrote about in my outlook for the logistics service provider industry, companies may just decide to outsource more of their logistics operations and put the labor challenge on their LSPs.

People, Process, and Technology—this is the “three-legged stool” analysts like to talk about.  At the moment, the people leg is bearing more of the weight.  If companies can’t find ways to leverage processes and technologies more effectively to alleviate this load, they could find themselves on the floor in the not too distant future.