With fewer Americans out of work, there is more money in shoppers' wallets this holiday season, but a tighter labor market isn't an all-around win for the industry.
Macy's on Tuesday said it would host its first national hiring day at its nameplate, Bloomingdale's and Backstage stores. The company is looking to hire 83,000 seasonal employees, roughly flat with last year, with an additional 3,000 of those workers staffing its fulfillment centers. Those 15,000 employees would equate to roughly 18 percent of its seasonal workforce.
Macy's announcement follows similar decisions from other retailers, who are stepping up their hiring efforts amid a tighter job market. Target, which is adding 77,500 temporary workers in its stores and fulfillment centers, will for the first time hold a nationwide hiring event across all of its stores over one weekend.
Toys R Us, which last year hosted regional events, will also launch its first nationwide recruiting efforts. They will take place at its shops and distribution centers on Oct. 10 and Nov. 11.
"It's definitely been a more competitive marketplace," spokeswoman Alyssa Peera said.
The U.S. unemployment rate fell to 4.9 percent in August, down from 5.1 percent a year prior. The retail trade has accounted for a chunk of hiring over the past 12 months, with some 15,968,000 people working in the industry. That's up nearly 2 percent from a year ago.
At the same time, preliminary government data show that slightly more retail jobs were unfilled in July than a year earlier.
"The same group of [retailers] that were fighting over people last year will be fighting over people this year. And there's a few less people to fight over and a few more positions to fill," said Steve Osburn, a director at the Kurt Salmon consulting firm who specializes in the supply chain.
Along with a series of minimum wage hikes at the company and state level, that dynamic has raised the price of hiring help. The average hourly pay for employees working in the retail trade ticked 2 percent higher in August, to $17.92, according to preliminary data from the Bureau of Labor Statistics.
It's only going to get more expensive for retailers who want to attract the best workers, said Tyler Owen, a senior director at JDA Software who specializes in workforce management.
Already, Toys R Us has said it will introduce new incentives this year, including pay increases in competitive markets, additional discounts, and after-hours parties and recognition for employees.
The Federal Reserve's Beige Book recently noted modest retail sales gains in Boston, Cleveland and San Francisco, which would indicate those cities are more competitive markets, said Barry Asin, president of Staffing Industry Analysts.
"The price of labor is just going to continue to skyrocket," JDA's Owen said.
Overall, retailers are expected to hire 738,800 seasonal workers for the winter holidays, according to a forecast from outplacement firm Challenger, Gray & Christmas. That would be flat with last year.
But as online shopping continues to account for a larger piece of the pie, retailers will need to beef up staffing levels at their off-site distribution centers and in their stores' back offices.
Like Macy's, both Toys R Us and Target are putting a greater emphasis on these types of roles. Though Toys R Us would not provide a specific figure, Target has said it will hire 7,500 temporary workers to fill openings at distribution centers. That's up from 6,500 last year.
Yet despite their traditionally higher pay, Owen predicts warehouse roles will be some of the toughest to fill. That's because those opportunities typically aren't top of mind for job seekers, he said.
Working in a warehouse tends to be more labor-intensive than customer-facing roles, which can make those jobs appealing. What's more, fulfillment centers are often built in rural areas where land is cheap, but there are fewer residents, Osburn said.
Last season, retailers had pronounced difficulty filling warehouse gigs in areas including central Ohio, Memphis, Tennessee, and Louisville, Kentucky, Osburn said. This year, he predicts retailers will need to boost employment in these centers by roughly 20 percent, to match the industry's growth.
"More and more, people are finding other ways to make money," Asin said. "Everything from Uber drivers to working for sites like Upwork or Freelancer or TaskRabbit, even Airbnb are ways for people to supplement their income."
As retailers scale their in-store fulfillment services, it's crucial they hire more people for their click-and-collect and ship-from-store departments. Using bricks-and-mortar shops to fill orders was a pain point for the industry last season, according to a survey by JDA. Roughly 50 percent of respondents who elected to pick up their own order had some sort of issue with the process, whether their item wasn't available or they had to wait for an extended period of time.
Although retailers are placing a greater emphasis on this area for the holidays, Osburn anticipates consumers will encounter similar issues. Getting their stores in shape will be especially challenging for retailers in the final days before Christmas, as the first day of Hanukkah falls on Dec. 24.
Meanwhile, because Christmas is on a Sunday, the final cutoff for shoppers to order online gifts for home delivery will occur earlier. That will likely cause more consumers to collect their orders in store, Owen said.
"Those two overlaying demand curves are going to be right on top of each other," he said. "It's going to make it that much more difficult."
Yet while some temporary workers are expected to see a lift in their hourly wages this year, Owen noted that it will be measured. Many retailers still view labor as an expense, as opposed to a potential differentiator for their brand.
"They don't want to pay any more than they would have to," Owen said. "It's a matter of giving just enough to protect the brand ... without breaking the bank."
Osburn stressed that retailers shouldn't rely on pay alone to attract workers. Otherwise, when a competitor down the road lifts their hourly wage by 50 cents, employees won't hesitate to break their loyalty. Retailers should also consider offering flexible work schedules, child care services or opportunities for bonuses, he said.
"Those are the type of things that tend to be successful," Osburn said.