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Could Low Unemployment Create Challenges for Logistics Industry this Holiday Season?

Categories: BCO/Shipper, Warehouse.

Falling unemployment rates point to a big holiday season for retailers, but potential hiring shortages in the supply chain. This winter warehouses and shippers are getting creative in recruitment and raising pay to attract more workers to meet demand.

Jobless Rates Down

August unemployment numbers showed unemployment rates falling in 29 states and staying steady in another 11. Thirty-two states added jobs to their workforce. The drop in unemployment rates creates a catch-22 at the holidays: More people working translates to more retail sales, but more people already employed means a smaller pool of candidates for the extra holiday jobs created by the demand.

“Once again, most analysts are anticipating healthy holiday sales this year,” outplacement firm Challenger, Gray & Christmas CEO John Challenger said. “However, there are several factors that may prevent these strong sales expectations from translating into increased hiring.”

Both retailers and companies along the supply chain felt a similar crunch last holiday season when recession-level unemployment rates began to drop.

“Last year was the first year that companies felt some challenge [finding workers], and this year they’re feeling it even more,” said Craig Rowley, Leader of the Retail Practice at Hay Group, a provider of human-resource services. “Between the low unemployment rate and, hopefully, a good Christmas, it’s going to be tough.”

Online Shopping Boom

Industry experts predict an ecommerce growth rate almost 8 percent higher than the total retail growth rate through 2018. The continued growth of online shopping has reshaped the supply chain, especially during the holidays.

To keep up with the demands of fulfilling ecommerce orders, companies have started growing their supply chains with warehouses in different locations. Warehousing, storage, and order fulfillment in the United States is now a $31 billion industry.

Amazon, for example, opened 19 new warehouses to fill the gaps between their larger fulfillment centers. Each warehouse requires a team of employees, with more demand during the holidays, and some regions just don’t have the available workers.

“There are a lot of warehouses there, and the market’s saturated. In some areas, the unemployment rate is as low as 3% to 3.5%,” said David Hauptman, OHL’s Vice President of Product Marketing.

Changes in Hiring

Companies in the logistics industry have been making some changes in their holiday hiring to attract the number of workers they need to keep up with the demands of online shopping.

Hoping to lock in the best employees, many companies are starting their holiday season hiring earlier than usual.

“Early warning signs of people not being able to get enough labor are really starting to shine through,” Frank Layo, a Retail Strategist with Kurt Salmon, said.

Companies are also raising their wages to hopefully attract more workers. Long stagnant warehouse worker pay rates are seeing a $1 to $3 per hour raises this year. Some companies are adding perks like health and dental coverage for seasonal workers as an added incentive.

Supply chain employers are also being more flexible with their scheduling, allowing them to take on more workers who only have certain hours available.

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