This Month in Labor: July 2022

Until recently, the state of labor and the economy has been… weird.

On one hand, to-date 2022 has been the worst year for U.S. stocks since the 1970s. And growth appears to be stalling as the highest inflation in 40 years may already be driving the U.S. into recession.

On the other hand, jobs remained abundant and wages high. 

Terms to describe that kind of economy have been elusive.

“What’s the adjective that goes along with that?” Elise Gould, a senior economist at the Economic Policy Institute opined in an interview with CNN.

Back to normal-ish?

Yet, signs are pointing to more familiar territory ahead.

According to 2022 data released by the Labor Department in early July, weekly jobless claims went up by 4,000—the second time in three weeks they increased.

Granted, the latest data was likely distorted by the July 4th holiday, which resulted in several states submitting estimates.

Still, compare job growth in May and June of this year to the same trends of the last two. In the second quarter of 2020, for example, the economy added an average of 225,000 jobs per month. In the first quarter of 2021, that figure jumped to 978,000.

But this past May and June, job growth slowed to an average of just under 400,000 per month.

Economic realities calling

What’s eating into the labor market’s ability to defy gravity?

One factor could be called the “COVID correction.”

Walmart, the largest employer in the U.S., said it recently over-hired due to COVID-related staffing shortages and then lowered head count through attrition. Amazon also decided it had too many workers in its warehouses. And FedEx, a company serving several big retailers, said in late June it was hiring fewer people.

A second factor is the Federal Reserve.

Eager to tame inflation, the Fed’s aggressive monetary policy is stoking fears of a recession. There is concern that, even though rising wages haven’t kept up with inflation, a recession will put a halt to progress workers have made.

With the likelihood of recession increasing, retailers appear to be hedging their bets. Which comes as no surprise to director of retail studies at Columbia University Mark Cohen. “[Retailers] are going to take a conservative view of what’s possible and what’s necessary,” he told ABC News. “Because the price they will pay for being wrong will be minimum if they run out of goods and don’t have enough staff, and massive if they wind up with an inventory glut and they have too many people employed.”

That likely doesn’t surprise Daniel Dorfman, an economist with the U.S. Bureau of Labor Statistics. In an April blog post, he said he expects U.S. retail trade jobs to shrink by “nearly 587,000 jobs from 2020 to 2030.” He projected that department stores and general merchandise stores could see the greatest loss of jobs, or about 233,500 positions representing a 7.7 percent decline. He also expects the retail sector to comprise only 8.6 percent of total employment in 2030—down from 9.7 percent in 2020.

Warehouses (sort of) winning

Retail’s steady loss seems to have been a gain for warehousing and storage.

Compared to retail’s growth of 8.1 percent between 2010 and 2019, the industry expanded 86.1 percent during the same period.

Competition with online websites and changing consumer preferences have driven most retail store closures. Yet that doesn’t mean demand for what retailers can sell has declined. Quite the opposite. In fact, retailers have found themselves in greater need of places to store inventory and the logistics to keep tabs on where it’s all stored.

Yet even with the labor market cooling off, the shortage of warehouse and distribution center workers persists. At the height of the pandemic, experts thought people would eagerly return to work when they could. They were wrong.

Last year, the Pew Research Center found the top three reasons cited for leaving a job were low pay, lack of advancement opportunities and a feeling of being disrespected—three historically persistent challenges in warehousing and logistics positions.

‘Will work for tech.’

The struggle to attract workers has led many companies to accelerate the automation of more manual tasks within their supply chains. Which, ironically, may actually attract more workers.

According to a study released by Lucas Systems in June of this year, warehouse workers said they would switch jobs to use tech that helped them do their work better, even if it meant taking a pay cut.

The study also found that, instead of viewing them as a threat, workers see robots as productive allies. While they also expressed anxiety about increased quotas, 46% felt robots would reduce their physical stress, 44% thought they would help improve speed, and 40% believed robots would increase their work accuracy.

“If on-floor workers equate tech investments with the company’s willingness to help them, it shows us that warehouse technology could play a vital role in attracting and retaining employees,” said Lucas Systems CMO Ken Ramoutar.

Still, technology will only do so much to address labor shortages. As supply chains become more complex, interconnected and less linear, the demand for skills at all levels is not only expected to continue, the skills needed are also expected to become more sophisticated. In other words, the ride could just get weirder from here.

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