(Reuters) - United Parcel Service ( UPS ) missed Wall Street estimates for second-quarter earnings on Tuesday, hurt by subdued package delivery demand and higher costs from its Teamsters labor contract.

Shares of the delivery company, seen as a bellwether for the global economy, were down about 7% in premarket trading, while shares of rival FedEx ( FDX ) fell about 2%.

UPS, FedEx ( FDX ) and other home delivery providers have been slashing costs since the end of home-bound consumers' early pandemic e-commerce binge in late 2021. Demand for doorstep delivery has since been stubbornly lackluster, in part due to higher costs for food and shelter.

The world's biggest package delivery firm by market capitalization posted an adjusted profit of $1.79 per share for the quarter, below analysts' estimates of $1.99, according to LSEG data.

The company expects cost pressures to ease and for revenue and volume to improve in the second half of the year.

Atlanta-based UPS will absorb 46% of wage and benefit costs from its five-year Teamsters contract in the first year that ends this month.

UPS reported second-quarter revenue of $21.8 billion, down 1.1% from last year and below analysts' estimates of $22.18 billion.

Revenue per piece declined 2.6% in the domestic segment, while average daily volume declined 2.9% in the international business.

However, in an upside for the company it will replace FedEx ( FDX ) as the primary expedited air service provider for the U.S. Postal Service (USPS) in October. UPS expects that five-year contract to be profitable in its first year. That business generated $1.75 billion in revenue in fiscal 2023 for FedEx ( FDX ), but was a drain on profits.

UPS also has been slashing costs to lift margins. In January, it said it would cut 12,000 jobs to save $1 billion.

It struck a deal in June to sell off its volatile truckload brokerage business, Coyote Logistics, for about $1 billion to RXO

It is also shifting its focus to higher-margin small- and medium-businesses and healthcare accounts, which generate better margins.