From Clerk to Courier: How COVID-19 is Accelerating the Transformation of Employment in the U.S.
Among the bevy of disheartening headlines that have cascaded from media outlets since COVID-19 reached U.S. shores in late February, one developing story has been especially tough to stomach – over the three-week period spanning March 15 and April 4, 16.5 million American workers filed for unemployment.
To make that statistic easier to conceptualize, consider the start of a week in New York City, which has a population of 8.7 million – imagine if by dusk on Friday morning, the entire city had been laid off. Calling that scenario ‘catastrophic’ wouldn’t be off base, but that’s before learning that just a week later, the 7.8 million who reside in the San Francisco Bay Area had also been dismissed from work.
While less geographically concentrated, the magnitude of the reality that our country faces far exceeds what was hypothesized above. Economists at the Federal Reserve Bank of St. Louis have projected the loss of jobs for 47 million in downside cases stemming from disruption caused by the pandemic, which translates to an unemployment rate of 32.1%. With Congress negotiating a fourth relief bill on the heels of the $2 trillion dollar stimulus package that President Trump signed into law on March 27, the Federal Government is taking unprecedented measures to curb an unemployment rate that has climbed at a record-breaking pace.
It will likely take weeks (if not months) to quantify the impact of this stimulus, but despite all of the uncertainty, there are a handful of companies actively hiring to meet the demand of consumers who (unsurprisingly) still need staple goods amid the nationwide lockdown. Amazon (NASDAQ:AMZN), which raised minimum pay to $17/hour, has already hired 80,000 with plans to employ an additional 20,000 to keep up with order fulfillment. Instacart announced a need for 300,000 workers, more than doubling the size of its current workforce of 200,000, to meet the surging demand for grocery deliveries. Even retail giant Walmart (NYSE:WMT), which employs 1.5 million, aims to add 150,000 workers for assistance in its e-commerce warehouses.
To say that there is a labor market despite the onslaught of unemployment may sound tone-deaf, but it would not be false. While the pandemic has exacerbated the demise of brick and mortar retail as evidenced by the recent closures of Macy’s (NYSE:M), JC Penney (NYSE:JCP) and Kohl’s (NYSE:KSS), it has accelerated the transformation of employment in the U.S., a shift that began decades ago albeit in a far less abrupt manner. Over the five years preceding 2020, employment in the U.S. e-commerce industry increased at an annualized rate of 10.3% while retail headcounts declined 9.6% over that same time period. Prior to COVID-19, employment forecasts supported the continuation of this trend with e-commerce estimated to grow at an annualized rate of 6.4% versus a modest 1.3% expected rise for retail over the next five years through 2024, but as the pandemic-induced upheaval persists, the difference between both projections will almost certainly increase.
Store clerks and floor staff, many of whom boast 20+ year tenures with their employers, have become collateral damage in the sudden expiration of the retail industry and will be forced to pivot careers during a precarious time. Delivery couriers, truck drivers and others positioned on the frontlines of the pandemic have expressed serious concern for personal safety while handling hundreds of packages, doors, gates, etc. with inadequate sanitation supplies and no health insurance. These workers have found themselves between a rock and a hard place where the effort to make ends meet could jeopardize their own well-being.
As investment bankers with a focus on both technology and consumer businesses, we are continuing to track the shift in employment from traditional ‘brick and mortar’ retail to web-based e-commerce and how that movement may alleviate unemployment figures in the coming months.
Sources: United States Census Bureau, The Wall Street Journal, IBISWorld