The Retail Trade sector has exhibited employment declines that are some of the highest rates in absolute and percent terms due to the COVID-19 (coronavirus) pandemic, well above the sector’s 2007-09 maximum and the 2015-19 average. Retailers laid off employees as consumer demand plummeted in the second quarter of 2020, which led to declining sales of discretionary goods. Now, despite renewed consumer demand amid the 2021 holiday shopping season, retailers nationwide are experiencing labor shortages during this holiday season, well below needed levels of employment. As a result, retail locations are still losing out to growing online sales, despite a sector recovery compared with 2020.
Everything keeps coming up online
This nightmare for retailers and shoppers alike keeps get worse when considering that, according to Sensormatic Solutions, a retail technology firm, in-person Black Friday shopping declined 28.3% compared with 2019 levels. Though current levels are nearly a 50.0% increase in traffic compared with 2020 levels, online retailers still rung in near-record sales of $8.9 billion on Black Friday 2021, compared to $9.0 billion in 2020.
Furthermore, Cyber Monday sales in 2021 have held mostly steady, declining 1.4% year-over-year and generating $10.8 billion in sales in 2020 compared with $10.7 billion in 2021. If anything, this demonstrates how consumers are beginning to spread out their holiday shopping, preferring to do so online instead of in stores this holiday season. That is a problem for retail-based industries trying to make a holiday season comeback in 2021 after a subdued 2020.
The elves have left the building
This recent labor shortage has not just persisted in the retail trade sector, but also in the Transportation and Warehousing sector and the Wholesale trade sector. Essentially, due to a dearth of employees and pandemic-related doldrums, the 2021 holiday shopping season is anticipated to be a serious logistics headache. Considering longer lead times in shipping, the difficulty of procuring and distributing supply of gifts and the bottleneck of employees in retail industries, the gift supply chain is operating overcapacity, despite a funneling of in-store sales to online sales in recent years.
A holiday gift for you
Overall, amid declining consumer demand first experienced in the second quarter of 2020, retailers were quick to make layoffs as necessary and as operating restrictions reduced overall operating activity, with many being uncertain of what the future held. None would be prepared for the rapid resurgence in consumer spending as employment figures rose and as vaccinations rolled out in early 2021. As the economy reopened and operating strictures eased, the same retailers were caught in a bind, unprepared to operate at such levels of demand with an insufficient number of employees. Now, in an attempt to keep up with surging demand, retailers such as Amazon, Target, Walmart, Kohls and Macy’s are raising wages and offering incentives to increase seasonal employment.
Melting snow
Overall, the most pertinent questions are how long this labor shortage will last and how it is expected to affect the macro-economy at large? Perhaps a good place to start is with the determination of whether observed wage inflation is transitory or representative of a broader shift in labor markets. Only time will tell, especially as holiday sales are forecast to grow year-over-year, with companies operating with employees likely getting a bigger slice of the holiday sales pie.
