FedEx Delivers Bad News on the U.S. Economy


It's been three years now since Warren Buffett announced the end of the Great Recession, and told Americans, in effect, that things can only get better from here.

But Monday morning, FedEx (FDX) employees got a different memo from their bosses: With fiscal fourth-quarter profits down, and full-year cargo volume dropping for the first time in more than two years, it's time to tighten belts and jettison some crewmen.

Hoping to give its profits some lift, FedEx announced that it will begin offering "voluntary" buyouts to its staff. Details are still being worked out, and FedEx says it won't reveal the whole extent of the program until its investors and lenders meeting in Memphis on Oct. 9 and 10.

But for now, FedEx has confirmed that the buyouts will primarily focus on "non-operational staff," and in particular, employees at FedEx Express and FedEx Services.

What Does It Mean to You?

Viewed in isolation, this might not seem like big news. But viewed in the context of similar buyout initiatives at Ford (F) and General Motors (GM), and Google's (GOOG) just-announced layoff of 4,000 Motorola Mobility workers, FedEx's announcement actually appears to be part of a trend in America today. And what is this trend?

Not to put too fine a point on it, but the economy's slowing. Big companies are starting to lay off workers again -- just like back in the bad old days of 2008. And that big jobs gain we saw in the July unemployment report a couple of weeks ago? It was a fluke.

Not Playing Politics

Some may be tempted to spin FedEx's announcement, and in particular, the October release date as an attempt to sway the results of the November presidential election. (It wouldn't be the first time this has been tried.) This doesn't seem to be the case, though.

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To the contrary, FedEx says it will spread out the redundancies, and the costs thereof, "over several quarters in fiscal 2013 and 2014." If anything, FedEx appears to be going out of its way to ensure its bad news doesn't affect results at the November polls. That's good news for President Obama. It will be small consolation, though, to the workers who will be losing their jobs.

And for the rest of us? A slowing economy that's causing layoffs throughout the economy isn't such great news either.

Motley Fool contributor Rich Smith holds no position in any company mentioned. The Motley Fool owns shares of Ford Motor and Google. Motley Fool newsletter services have recommended buying shares of General Motors, Google, FedEx, and Ford Motor. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor.

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