US warehousing sector has over 50% more workers on payroll than five years ago but now faces tough labour market

Payroll data from April 2021 shows nearly 170,000 more workers in the warehousing and storage sector than 12 months prior

Image by Pashminu Mansukhani from Pixabay

According to Bureau of Labour Statistics data, the US warehousing and storage sector workforce has increased 13.6% Year-on-Year (YoY) when comparing April 2021 to the same month last year.

Whilst this is a slight decline from the highest level recorded, which was reached in November 2020 as the sector handled peak season, it represents a massive 53.7% increase in employees compared to five years ago.

In 2016, there were 914,400 workers in the sector, compared to 1,405,600 as of the most recent data release.

The staggering increase underlines the growth in the sector, both in the long term and due to recent trends generated by the pandemic in terms of e-commerce and home delivery fulfilment.

This hiring boom is putting strain on the sector as it struggles to get workers through distribution centre doors in the current climate.

This is borne out by the data, which shows that although the number of employees peaked in November 2020, and have since declined by around 30,000 total, hourly wages have not fallen and job opening rates have increased since that point.

In fact, average hourly wages are up from November 2020, rising from $21.2 to $22.1 in April. Vacancies have now consistently registered 5% or more of the total jobs in the sector across all months so far in 2021’s data, with the latest reading of 5.2%, above the 4.7% recorded in November 2020.

A McKinsey report, which surveyed the Consumer Packaged Goods (CPG), industry notes that “In 2020, wages and labour costs in manufacturing increased substantially—from 5 to 20 percent—as a result of COVID-19 pay and overtime. These are expected to stay high in 2021. Warehousing, too, has become more expensive because of higher labour costs and is expected to remain at higher levels in 2021 as well.”

This data picture shows a sector that is facing consistent upward wage pressure and high competition when it comes to hiring for facilities. Currently the average private sector hourly wage within the US is $30.17 according to BLS statistics. With average wages at $26.08 for the transportation and warehousing segment, the sector remains substantially below this level, even with recent increases, and is likely to have to up wage floors further across 2021.

The trend may be seen as counterintuitive in the face of major job losses in other sectors and a much higher unemployment rate than that seen before the pandemic. However, many of the job losses have been in sectors such as leisure and hospitality, where there is low worker mobility when it comes to the warehousing industry, as many of these workers are not situated close to distribution centres nor have the right skill sets to take advantage of the e-commerce boom. Furthermore, there appears to be some reticence among job seekers to put themselves at risk of infection by taking up these types of jobs.

Signing-on bonuses are reportedly reaching into the thousands of dollars, with Amazon offering bonuses of up $1,000, with an additional incentive of $100 for those with proof of a COVID-19 vaccination.

This lack of a ready workforce will create significant impetus for more automation pushes in warehouses countrywide, as it does not appear that a pool of available labour is going to open up in the near future.

According to the Association for Advancing Automation (A3) the level of orders for industrial robots in North America increased 20% YoY in Q1 2021, with the food & consumer goods sector placing 32% more orders than the year prior.

Rapidly rising demand is spurring more robotics companies to enter the space and ramp up their production of materials handling robots. Recently, Boston Dynamics, which previously focused on research and development of autonomous systems within the defence sector, announced it was expanding its range of robots into the logistics sphere, adding in a new machine for picking and moving boxes. This emphasises that this field will see more players, accelerating adoption and increased innovation in the years to come.

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