Labor Shortage, Record Quits Likely to Have Major Impact on Holiday Hiring

October 14, 2021
Author: Mallory Vachon, Ph.D., Sr. Economist

As the 2021 holiday season approaches, businesses dependent on end-of-year shopping, entertainment and travel face immense staffing challenges. The ongoing pandemic has continued to affect hiring. These industries remain disproportionately impacted by COVID-19 — from fears of contracting and bringing home the virus to vaccine mandates and caregiving responsibilities. Many older workers opted for early retirement, permanently leaving the workforce early due to pandemic-related effects.

While other industries have enjoyed the ability to work from home entirely or utilize a hybrid model of commuting to the office for only a few days a week, hourly employees in retail, supply chain, and those in the travel and leisure sectors have not been so fortunate.

Will holiday employers find enough workers to meet customer demand?

Disgruntled and demanding customers, longer hours resulting from understaffing, pandemic fatigue, and general burnout resulted in more employees exiting the workforce. The pandemic created unique challenges for retail, but it also compounded long-term trends, including the shift to online shopping, making matters even more complex for employers. With the already tight labor market and businesses struggling to find and retain talent, these additional pressures could make hiring more difficult.

Low Vaccination Rates and Burnout May Affect Seasonal Hiring

As of early August, the six-month job growth for jobs in Leisure and Hospitality varied greatly depending on a state’s COVID-19 vaccination rates. These jobs grew an average of 12% where more than 66% of residents were vaccinated versus less than 4% growth were less than 50% of residents were¹. Demand and competition for workers will likely be greater in states with high vaccination rates.

Companies have been searching for retail workers and salespeople throughout 2021, as evidenced by record job openings. However, the ongoing hiring push, combined with record quits (voluntary resignations) from workers, could put a damper on holiday hiring.

Job openings remain high, and retailers are gearing up for holiday hiring. A quick online search for “holiday hiring” reveals many full-time and part-time retail job opportunities in the mid- to late-October timeframe. However, they may not need as many seasonal workers as in years past because there were so many retail jobs lost during the pandemic and they have been trying to hire all year. For example, Target is hiring fewer seasonal workers than last year and shifting additional hours to existing employees². Given the turnover and challenges of the past two years, retailers could be looking for longer-term employees rather than temporary workers.

Better Pay and Benefits Could Help Meet Market Conditions

Holiday spending is anticipated to increase year-over-year, partly from an increase in demand and partly from increased prices due to supply chain problems and related scarcity³. A forecast by Mastercard SpendingPulse predicted holiday retail sales could rise 7.4% from a year earlier and climb 11.1% on a two-year basis, fueled by a rebound in in-store shopping and consumer demand.

In response to current labor market conditions, in which many businesses are already short-staffed, retailers are offering increased pay and other benefits, like signing bonuses, flexible shifts, tuition support and health insurance to boost holiday hiring. With an unemployment rate of 6.5%, retail has more potential workers looking to return to work than other industries, yet employers need these incentives to lure back workers and ensure they don’t switch to other industries that are also offering better pay and benefits than before.

Anecdotally, many retailers, like Amazon, UPS and Walmart, are also hiring for supply chain and fulfillment positions, which may hinder the hiring of direct retail salespersons. Supply chain and fulfillment jobs may be more desirable due to higher pay and less face-to-face customer interaction. Such hiring may also signal that, even though in-person sales will likely increase over last year, retailers are expecting online shopping trends will continue based on convenience coupled with customer fears about the pandemic.

Where Can Recruiters and Talent Acquisition Look to Fill Job Openings?

Young people (age 16-24) or older workers who haven’t been in the labor force may be a source of labor. The younger demographic has the highest unemployment rate, indicating greater availability. Near-term pandemic trends will most heavily influence older worker interest in public-contact seasonal roles⁴.

Youth employment trends from the summers of 2020 and 2021 show unemployment had substantially decreased from 18.5% in July 2020 to 10% in July 2021, still higher than the July 2019 level of 9.1%. As of July 2021, 20% of youth worked in Retail and 25% worked in Leisure and Hospitality, indicating high interest in industries seeking seasonal workers.

The 75% share of unemployed youth looking for full-time work was higher in July 2021 than at any time in past few years. Youth not attending school are most likely to be unemployed and seeking work; they may be willing to take on seasonal jobs while pursuing full-time positions. Part-time students primarily at two-year colleges are the next most likely to participate in the workforce and could be targeted more for part-time seasonal jobs.

If these trends are any indication, retailers may look to young people to fill the holiday gap, but there is still likely to be a shortage of workers.

Why It Matters

ThinkWhy’s LaborIQ industry recovery timeline indicates retail will not recover all jobs lost to the pandemic until 2025 or later. While August and September saw a combined 560,000 increase in jobs, labor market analysis predicts a steady recovery. Overall, there are still 3.1 million fewer people in the labor force compared to February 2020, before the pandemic.

With the already tight labor market and businesses struggling to find and retain talent, Retail and Leisure and Hospitality will need to maintain competitive wages and benefits, along with good working environments, or risk losing employees to industries with higher wages and less pandemic risk.

Despite the prediction of slow recovery over the next five years, growth will continue steadily in the service sectors. Better pay and benefits may help those seeking to fill positions to lure workers back into the labor talent pool in the long term. The upcoming holiday season will provide a clear test of whether and how effective the improved pay and benefits will be on meeting holiday hiring goals.

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