Seasonal hiring for the holiday season will likely be slower than last year, a potential sign that the labor market is beginning to cool off as the Federal Reserve keeps interest rates high.
Retailers across the country typically load up on staff ahead of the holiday shopping season, which generally starts with Black Friday, the day after Thanksgiving, and runs through the end of December. More workers are needed to handle the uptick in people purchasing goods for presents and groceries for holiday feasts.
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But the remainder of 2023 is expected to see less of a surge in hiring than the past couple of years, which were fueled by a boom in demand as the country emerged from the COVID-19 pandemic. The National Retail Federation expects employers to add between 345,000 and 445,000 seasonal workers to their payrolls — that is as much as 40% lower than the recent peak in 2021.
Additionally, outplacement services firm Challenger, Gray, and Christmas predicts retailers will add some 410,000 seasonal positions, which would be the lowest number of retail jobs added in the fourth quarter since 2008.
“With inflation slowing, companies, particularly retailers, won’t be able to pass increased labor costs to the consumer as easily,” Andrew Challenger, head of sales and media at Challenger, Gray, and Christmas, told the Washington Examiner. “This could lead to more cuts, rather than more added positions, as evidenced by the increase in job cuts in this sector.”
Jeffrey Roach, chief economist for LPL Financial, told the Washington Examiner that he thinks that the average consumer who is out shopping this holiday season might notice the trend as well.
“At this point it seems like what we’ve seen from the survey data is firms are not likely to increase the seasonal hiring much,” he said. “I think the bottom line here is that for the average consumer, maybe expect less customer support and longer lines.”
Roach said that it must be noted that the U.S. is coming off of an unusually robust year economically. He said the strong spending and economic growth was, in part, “artificially boosted” by factors like lingering pent-up demand and “revenge spending.”
During the height of the pandemic, consumers pulled way back on spending because of COVID-19 restrictions that had been implemented and general anxieties about the virus. As the U.S. began opening back up, people wanted to go out and spend money doing things that they couldn’t for so long. Roach thinks that some of that drive was still being felt through the economy in the first half of 2023.
“That trajectory is not going to continue, most likely,” he said.
Still, Roach pointed out that there are not many major signs that the shopping season will be negative, although there are some. He pointed to things such as rising credit card balances and delinquencies as well as rising delinquencies on auto loans.
“That’s clearly a very early leading indicator, but everything else — there is still a lot of support for the soft-landing narrative,” he explained.
But pent-up demand isn’t the only thing that the pandemic has left in its wake. There is also the proliferation of online shopping, which was growing before COVID-19 and then got a huge shot in the arm given that people weren’t able or didn’t want to leave their homes to go shopping at brick-and-mortar stores.
“One bet that firms are taking is that the average consumer is going to first consider, can I get this thing online? Can I shop the deals?” Roach said. “It’s possible that firms can get away with what I think they’ll probably do and just hire less, and they’ll do that because of the attraction of online buying.”
Michael Collins, interim director of the School of Resort and Hospitality Management at Florida Gulf Coast University, told the Washington Examiner that even if hiring is not as robust this year as past holiday seasons, employers are still going to have to contend with challenges filling the positions they do have open.
“Because of the fact that … there’s an acute labor shortage in our country, particularly for front-line entry-level positions,” Collins said.
Still, he said depending on their economic positions, some people might end up seeking out such jobs not because they are unemployed but because they want to make a little extra money in addition to the income they are already bringing home.
Another factor that could be influencing the slowing of seasonal hires this year is a shift in when people are doing their holiday shopping.
Bankrate research found that half of holiday shoppers this year were projected to begin shopping before the end of October. And a quarter even started holiday shopping before the end of September, months ahead of Christmas. Retailers are also using deals to encourage people to shop well ahead of Black Friday.
“It’s not so much the day anymore; it’s about the whole kind of season of deals,” said Ted Rossman, senior industry analyst at Bankrate.
Collins said that because the holiday shopping season is becoming more spread out, it makes the need to have a massive surge of seasonal workers during a set time frame less urgent, putting downward pressure on the seasonal hiring.
While seasonal hiring might slow, seasonal shopping is still expected to hit a record this year, according to research from the NRF. The National Retail Federation expects holiday spending will increase by between 3% and 4% from last year, with shoppers set to spend up to $966.6 billion in November and December.
The expected growth is right in line with pre-pandemic growth trends, according to the researchers. From 2010 to 2019, annual holiday spending grew by 3.6% on average.
Still, this year’s shopping season will likely be a slowdown from 2022, which notched robust 5.4% growth. It is also lower than the pandemic rebound years — holiday sales rose more than 9% in 2020 and a whopping 13.5% in 2021.
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James Bailey, a professor at George Washington University's School of Business, told the Washington Examiner that if the final numbers come in below that forecast level, it doesn’t bode well for the overall labor market and state of the economy.
“If we vary from the 3%-4%, that’s just another sign that the economy isn’t going the way that we all wanted it to go,” Bailey said.