By Nico Grant
In December 2015, a robocall changed Brad Bassett’s life. His employer, Union Pacific Railroad, told Bassett that he was laid off from his $90,000-a-year job as a conductor.
“They really don’t give a reason,” Bassett, 47, said. “You just get a phone call one day telling you you’ve been cut off.”
Bassett doesn’t think the railroad will ever offer him his old job. He now sits in his Shakopee, Minn., house, anxiously applying to jobs that pay less. He’s been collecting unemployment insurance through the railroad retirement board, but it’s about a third of what he was making. His wife, Jennifer, supports the family, working at a nonprofit that gives food to the poor.
The stuttering energy sector has taken a toll on the railroad industry and its workers. Freight train carloads are down almost 13 percent year-over-year. As a result, all of the major freight railroads, including Union Pacific, CSX and BNSF, have shed workers through furloughs. When workers are furloughed, they are temporarily laid off, without a guarantee of ever coming back. Bassett and the 26,000 other rail workers laid off in the last year face the difficulty of replacing these high-paying jobs.
Beginning five years ago, as unemployment started ticking down from its post-recession peak, the U.S. economy experienced a shale oil boom. Railroads had a renaissance, shipping more crude oil, metal and fracking materials. The major railroads posted profits, invested billions in their infrastructure and hired thousands of new workers.
But then the music stopped. Crude prices tumbled; demand overseas nosedived; U.S. manufacturing stuttered; energy investments took a plunge.
Meanwhile, coal shipments shrunk during the boom, given the economy’s reliance on natural gas. Coal had accounted for 40 percent of the total tonnage that major railroads shipped before the boom. Now, that figure has been more than halved.
Overall, U.S. industrial mining is down more than 10 percent between February 2015 and February 2016. Suddenly, there was a lot less to ship on those shiny new rails.
Railroads such as Union Pacific immediately responded, furloughing thousands of workers across the country through 2015 as they shipped less. The result was that Union Pacific made a $4.7 billion profit in 2015, while shipping 5.8 percent less goods.
“The energy changes are beyond once-in-a-lifetime, and it’s had a bigger-than-expected impact on railroads,” said Anthony B. Hatch, a long time transportation analyst who is the founder of ABH Consulting.
Railroads carried almost 1.1 million ton miles (one ton carried one mile) in January 2016, compared to 1.3 million ton miles in January 2015.
In fact, carloads haven’t been this low since the Great Recession.
“Lower rail traffic levels reflect market fluctuations, including lower commodity prices and world economic softening,” said Kristen Clarkson, from the Association of American Railroads, an industry group.
Railroads have shown flexibility as they face weakening demand, eliminating full-time positions with guaranteed pay in favor of more part-time positions.
After Union Pacific furloughed Chad Kraml, they offered him part-time work in Sioux City, Iowa, four hours away from his home in Minnesota. Kraml took it, living out of his van. The work was inconsistent because the railroad invited more workers down than there were positions available. Then Union Pacific furloughed him again.
The reduction in labor costs is good for the business and its shareholders, but workers such as Kraml who used to power those trains have seen a dramatic reversal in their fortunes.
Kraml never thought he’d be on public assistance. But now, he uses food stamps to feed his four children.
“It’s kind of humiliating to be honest,” he said.
Kraml, 36, was furloughed in October 2015, when his wife was pregnant. He had been making $72,000 a year as a conductor running frac sand to drilling hotspots in the Midwest. Now, he’s gotten three foreclosure notices on his house in New Market, Minn.
Kraml’s wife tried to compensate by doing massage therapy at a chiropractor’s office, but it wasn’t enough. The family cut their Internet service, home phone, daughter’s gymnastics, and home maintenance. But it still wasn’t enough.
“I left a really good job for the promise of money, the retirement, and the new adventure of something I thought would be interesting,” Kraml said. He previously worked as a supervisor for Southwest Airlines.
Kraml took a job selling human resources and payroll services for Heartland, but he doesn’t get paid unless he sells, which he says is hard to do without a network of clients.
Kraml isn’t the only trainman struggling in the Midwest.
Minnesota alone has lost at least 320 railroad workers, a drop of almost 15 percent.
“Union Pacific was telling workers while they were training that there’d be jobs,” said Phil Qualey, the Minnesota state legislative director for SMART Union. “They were furloughed right after training.”
The one bright spot is that the industry has likely seen the worst of the layoffs. The transportation services index is stable – showing that freight trains are still running frequently, even if they’re carrying less.
Furthermore, intermodal traffic throughout North America has done very well as carloads of commodities have slumped. Intermodal loads are carloads filled with mixed goods being shipped across the country, excluding raw materials.
Part of the success of intermodal traffic comes from a slight uptick in consumer spending. In addition, railroads have had a lot of success shipping automotive parts, as the car industry had a record year in 2015.
“The domestic component of intermodal traffic is doing better because global trade has slowed,” said Hatch, the ABH analyst.
The Railway Association of Canada says their industry is having success shipping forest products, food and automotive parts into the U.S.
But no one expects that these successes will lead to the mass rehires of furloughed workers anytime soon. Energy-related shipments are a core business for many Class I railroads. The industry will only recover when there’s enough demand for their services.
Still, some are optimistic about the mid-term future.
“I feel very good about the rail industry serving North America,” Hatch said. “Over time, we’ll see increased U.S. manufacturing starting with chemicals in the next few years.”
But in the meantime, furloughed men such as Brad Bassett are nervously contemplating their next step.
“When I came into this field, I thought this would be my last job and I could retire,” Bassett said.
“I’m kind of in limbo right now.”