The logistics warehousing sector is on the horns of the same dilemma befalling numerous American industries since the economy began reopening in earnest: As warehouse jobs go begging, there appears to be an abundance of qualified labor filling the unemployment rolls.
A study by real estate advisory Newmark Group Inc. (NASDAQ:NMRK) showed that, in nine out of 10 large U.S. industrial markets, the percentage of unemployed Americans in the first quarter who had been former warehouse and transportation support workers was significantly higher than the national unemployment rate of 5.4% as measured by the U.S. Department of Labor. Only Salt Lake City, with a warehouse/transport unemployment rate of 5.3% in the quarter, had a lower percentage than the national average, according to the Newmark findings.
The New York/New Jersey metro area, which had the largest warehouse labor pool of the 10 markets surveyed with nearly 2.18 million workers, had warehouse unemployment rates of 14.6%. The Seattle, Houston and Chicago markets had double-digit unemployment rates, as did California’s Inland Empire east of Los Angeles and central Pennsylavania’s Interstates 78 and 81 industrial corridor. The Dallas-Fort Worth metroplex, which through June had the most industrial space under construction at 41.7 million square feet, was reported to have a 9% warehouse unemployment rate.
The relatively large percentage of unemployed ex-warehouse workers, even in a climate of strong macro demand, plentiful job openings and rising wages, indicates that for reasons ranging from still-inadequate wage levels and health-related concerns to child care, generous unemployment benefits and the lack of available transit options to and from warehouses, many workers have left the field and have stayed away, said Lisa deNight, Newmark’s director of national industrial research.
“There are a lot of people on the sidelines,” deNight said in an interview.
The No. 1 criterion in bringing workers back on the field is wages, deNight said, though issues such as the dearth of transit solutions for mobility-challenged workers are still on the list. DeNight said, however, that an increasing number of warehouse operators have been organizing van shuttles and pools in an effort to resolve the long-standing problem.
The wage trend, which for nearly two decades was a headwind for warehouse workers, is now a meaningful tailwind. After badly lagging the increases in the Consumer Price Index (CPI) since 2002, hourly warehouse wage hikes overtook the CPI in late 2019 and have not looked back, according to data from EmployBridge, a warehouse staffing company.
As of July, the average wage of a warehouse worker placed by EmployBridge on behalf of its warehouse operator clients is $16.91 an hour. In more expensive, high-demand markets, wages are pushing $20 an hour. It may not be too long before $20 an hour becomes the national median wage. Warehouse wages rose 4.25% from January to June 2021, a record six-month gain for the sector, Newmark said.
“We continue to struggle to get enough workers to fill all of our open jobs,” said Brian Devine, EmployBridge’s executive vice president.
Meanwhile, workers from other industries are filling at least part of the void left by ex-warehouse labor. Through the first half of 2020, 440,000 workers from other industries entered the warehouse/transportation field, according to Newmark’s analysis of U.S. Census Bureau data, which deNight said is reported with a three- to four-quarter lag. The half-year 2019 number stood at 394,000, Newmark said.
It is a good bet that more than 1 million workers will have joined the industry from other fields when the full-year 2020 numbers are reported, especially given the unprecedented e-commerce demand surge in the back half of the year that kept warehouses cooking round the clock.
Of the 440,000 worker transplants in 2020’s first half, half came from the retail and administrative support sectors. An additional 130,000 came from a melange of sectors such as arts and leisure, travel and lodging, agriculture and utilities, and white-collar, Newmark said. Industries like the arts, travel and lodging were hit extremely hard by COVID-19-related lockdowns, travel restrictions and a general reluctance of Americans to do much spending other than order goods online.
While it’s unclear where warehouse labor will come from, it is clear it will be needed. In the second quarter, a record 423.7 million square feet of industrial space was under construction across the country, Newmark said. Based on the firm’s formula of one worker for every 1,500 square feet of space, 282,470 new workers will be needed to support activities to cover that square footage.