latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/vast-labor-shortage-stresses-retailers-as-holiday-shopping-season-ramps-up-67972655 content esgSubNav
In This List

Vast labor shortage stresses retailers as holiday shopping season ramps up


Insight Weekly: Loan-to-deposit ratio rises; inventory turnovers ebb; miners add female leaders


Debt Ceiling Debate: IR Teams Should Prepare for Potential Market Downturns


Insight Weekly: Sustainable bonds face hurdles; bad loans among landlords; AI investments up


No disruption on the road to digitization

Vast labor shortage stresses retailers as holiday shopping season ramps up

SNL Image

Consumer spending is surging this holiday season, but retailers are struggling to hire and retain staff.
Source: Phynart Studio/E+ via Getty Images

During previous holiday shopping seasons, Murphy's Department Store in Stillwater, Okla., would have had three or four salespeople working at once during the day, and five or more on Saturday to handle the weekend rush.

This year, Becky Moore, Murphy's operations manager, says she is often the only one working at the store for six hours at a time.

"I can't get anyone to even fill out an application," said Moore.

The dearth of job candidates at Murphy's is emblematic of a labor crisis unfolding throughout the U.S. retail sector this holiday shopping season. Retail workers have fled to jobs with less customer interaction and better pay as American consumers have shifted more shopping online, leaving traditional department stores and other brick-and-mortar shops short-staffed at the height of the busiest time of the year.

"Retailers … have found it harder than ever to find the help they need during the all-important holiday shopping season," said Shannon Seery, an economist with Wells Fargo Securities.

The retail worker shortage is unlikely to abate soon as factors at the root of the issue, including ongoing health concerns, child care constraints and relatively low pay are expected to persist, said Gregory Daco, chief U.S. economist at Oxford Economics.

"We may have seen an acceleration of the structural transformation of the economy," Daco said.

Losing momentum

While 210,000 jobs were added to the U.S. workforce in November, 20,400 jobs were lost in the retail sector from October, according to the U.S. Bureau of Labor Statistics. Retail employment in November was up 2% from a year earlier, trailing overall U.S. employment growth of about 4%.

SNL Image

The retail sector, which had about 15.4 million workers in November, remains about 1% below where it was pre-pandemic in November 2019. But that relatively modest dip masks more significant drops throughout the sector as employment in e-commerce has risen significantly while staffing at physical stores has fallen.

SNL Image

Staffing for stores that would typically see a healthy boost in spending in November and December remains well below pre-pandemic levels, according to Bureau of Labor Statistics, or BLS, data released Dec. 3. Employment at sporting goods stores in November was almost 12% below November 2019 levels, while jobs at electronics and appliance stores were down almost 10%.

Employment at department stores is down nearly 5%.

There were more than 1.05 million job openings in the retail trade in October, up more than 50% from October 2020, the BLS reported Dec. 8. Workers are leaving their jobs in droves. In October, 683,000 retail workers quit their jobs, up more than 33% from the same time last year, according to the latest BLS data. About 6.3 million retail workers quit their jobs in the first 10 months of this year, compared to about 4.5 million through the first 10 months of 2020, according to the BLS.

Holiday hiring in November was the weakest it has been since 2010, and October and November hiring in the sector was the weakest since 2016, Daniel Zhao, a senior economist at Glassdoor, wrote in a Dec. 3 note.

Still, consumer spending has surged and in November was up 20% from pre-pandemic levels, according to the latest RBC Consumer Spending Tracker.

E-commerce shift

Zhao said that hiring patterns may just reflect changes in where Americans are spending.

"The shift to e-commerce and online shopping may be shifting jobs from traditional brick-and-mortar retail to transportation and warehousing," Zhao wrote.

Warehousing and storage jobs were up 18% in November 2021 from November 2019, according to the BLS.

Similarly, while staffing at physical store locations was down, nonstore retailers, a subsector that includes electronic shopping, saw a more than 11% surge in jobs over that time.

U.S. retail e-commerce sales totaled $214.6 billion in the third quarter of 2021, up from $201.4 billion in the third quarter of 2020 and just under $148 billion in the third quarter of 2019.

SNL Image

Online retail had been growing for years but skyrocketed during the pandemic as shoppers grew wary of the health risks with in-person shopping or were constrained by lockdown mandates.

A shift in more liberal work-from-home arrangements allowed many workers to get deliveries during working hours, ramping up the shift away from malls and other in-person shopping experiences, said Daco with Oxford Economics.

Overall retail sales in October were up 1.9% from September and up 14.8% from October 2020, the U.S. Census Bureau said Nov. 16. Still, staffing issues are impacting retail sales.

According to an October survey from the National Federation of Independent Business, 23% of respondents said that staffing shortages caused a "significant" loss of sales, while 28% said it caused a "moderate" loss of sales.

"Staffing shortages are creating the biggest stresses for businesses," said Holly Wade, executive director of National Federation of Independent Business's research center.

Retail wages losing competitive edge

While retailers have boosted pay and offered signing bonuses to attract workers, the growth in pay has slowed compared to the national average. Retail wages grew 4.4% from November 2020 to November 2021, compared to the national average that went up 4.8% over that stretch.

SNL Image

Still, wages are rising faster than they have in previous cycles, said Seery with Wells Fargo.

Over the past three months, average hourly earnings for retail workers have risen 4% from the same stretch a year ago, compared to just 2.5% year-over-year growth from 2010 to 2019, Seery said.