After nine years of steadily declining unemployment, the U.S. economy finds itself between a bit of a rock and a hard place. The rock: not enough well-qualified and willing workers to fill all the jobs that are open in many industries. The hard place: corporate America's deep desire to avoid raising wages.
But as MarketFoolery host Chris Hill notes in this segment of the podcast, the holiday shopping season demands retailers to be adequately staffed, because the consequences for failing on customer service can be significant. He and analysts Jason Moser and Taylor Muckerman discuss the issues facing labor-hungry companies, the areas where automation could be picking up more slack, the customer relations angle, and more.
A full transcript follows the video.
This video was recorded on Nov. 19, 2018.
Chris Hill: After Thanksgiving, of course, we've got Black Friday, and all the focus that happens on the retail industry. Something that we're starting to see evidence of is, I'm not taking a victory lap here, but I feel like we called it.
Jason Moser: Go ahead, take a victory lap.
Hill: I feel like we called this out earlier in the fall. Late summer, early fall, we always see large retailers coming out with their announcements of seasonal hiring. And one of the things we talked about on this show and on Motley Fool Money was, this will be interesting to see, and I'm not picking on Target (TGT 5.58%), but, when Target comes out and says, we're going to hire 100,000-125,000, seasonal workers, Macy's makes the same announcements, so does Walmart, etc. And at the time, we were saying, "This is going to be interesting. It's not 2010. We're now in an environment where unemployment is incredibly low, and wages are on the rise." And now, it really seems, Taylor, like, yeah, companies are having a tough time hiring. Among other things, some businesses are throwing hiring parties to try and get people in the door.
Taylor Muckerman: It's wild to think, with unemployment as low as it is, under 5%. It's going to be harder to find and more expensive to find seasonal labor. Companies are going to have to bump up that potential $8 an hour up to, $10-15. Amazon saying they're going to advocate for that $15 minimum wage across the country. I think that goes to a couple different points, maybe some competitive points, of Bezos trying to flush out some people that can't afford $15 an hour. Either that, or, just because he foresaw a tighter seasonal employment market and was like, "Hey, here's our $15. If you can beat it, go work there. If you can't, we're going to give it to you." This will be the first season that they hire their own delivery drivers for seasonal delivery. There's a lot more competition out there. It's going to be a little bit costlier. You'll probably see a lot more younger folks. Maybe this is the chance for some high schoolers to go out there and make an extra buck, because they might not have traditionally been hired for seasonal work.
Moser: I feel like the conversation has always steered around autonomous driving, robot cars, all that stuff. To me, this is by far and away, at least in the near-term, the more significant opportunity. I don't understand how all of these fast food restaurants to this point are not fully autonomous. It's not like they're offering bespoke menus. Generally speaking, you're getting what you want based off a pre-fixed menu. I don't know how many years left we have of these types of restaurants maintaining these big human workforces. To me, it seems like we're going more toward the automated direction anyway with them. It's astounding that they haven't gotten there quicker. It's food. It's not cars. It's not like you have to worry about burgers crashing into each other. You just make another burger.
Muckerman: I've seen some robots flipping burgers that were pretty fascinating to watch.
Moser: It does exist!
Muckerman: It does, it's incredible.
Moser: You see the soft drink carousel, for example. Those are fairly automated now. I have to believe it shouldn't be that big of a leap.
Hill: It's certainly been a tough year for the restaurant industry. In terms of the stocks, we've seen plenty of restaurants be taken private this year. But to your point, Jason, I do feel like the bar is higher for retailers than it is for restaurants. You would need to have a really bad experience at a fast food restaurant to not go back there at some point in the future. Whereas when it comes to retailers over the holiday season, they almost don't have the option about employing seasonal workers. If go into a Target, and you're looking for whatever's on your list, if you find someone who's helpful to you, that's going to stick with you, you're going to go back. Whereas, otherwise, you're going to hold a grudge. I know people who have had bad retail experiences at Retailer X and they say, "That's it. I'm done. I'm never going there. I have other options."
Muckerman: At least in my perspective, you expect a little bit more curt service at a fast food restaurant. Like, "Hey, here's what you want. Here's what you got. Thank you, see you again in a day." It'll only take five minutes to get to your food next time. Whereas retail, at least in person, definitely more personable. You'd like environment to be a little bit more structured, so you can actually find what you're looking for, since you have to search for it. At a fast food or dining chain, it's all laid out for you right there on the menu.
Hill: By the way, I know that there's a science behind this, but it just occurred to me, the whole thing where, you know how grocery stores will change up which aisles things go in? People get into a routine when they go to a grocery store. I don't know if it's every 12 months. Whatever it is, I just know it happens, because I go to the grocery stores and I'm like, "Wait a minute."
Muckerman: The Twilight Zone.
Hill: "You moved the spice aisle?!"
Muckerman: McCormick!
Hill: And that appears to be a phenomenon that only happens in grocery stores. The Target down here on Route 1, everything's the same, in terms of the location, which is good. If Target ever decided, "Let's just screw with people. Let's break up their routine," people would lose their minds.
Muckerman: Move the beer aisle.
Moser: I think it's related to the size. I will say, when I was in the golf business, part of the golf business is running a golf shop at the country club. You can imagine, that shop is significantly smaller than something like a Target. And we would switch that thing up all the time. But I also know that it takes maybe five minutes to walk through that entire shop. Whereas if you go to Target, you're like, "Man, I've got about five minutes." If it takes me five minutes to even figure out that they changed where things were, you've got a problem. I think consistency in that regard is something that they almost have to rely on. It has to happen.
