As businesses have struggled to contend with widespread uncertainty resulting from COVID-19 (coronavirus) and government-mandated efforts to contain it, US unemployment rates have soared, affecting all major worker groups. According to the Bureau of Labor Statistics, the unemployment rate rose 10.3 percentage points to reach 14.7% in April, marking the highest unemployment rate and largest month-over-month increase in the history of the series. The upward unemployment trend has continued in the weeks since, with an additional 2.7 million and 2.4 million initial unemployment claims for the weeks ended May 9 and May 16, respectively.
While the leisure and hospitality sector has been hit hardest, all sectors, including healthcare, have felt the sting. However, some businesses are faring better than others and are ramping up hiring efforts to adapt to the new reality. ProcurementIQ has analyzed staffing and employment trends in heavily impacted sectors and observed what businesses in these sectors are doing to stay afloat.
Leisure & Hospitality
There is no doubt that leisure and hospitality bore the brunt of job losses, with employment plummeting by 47.0% in April on top of previous losses in March. This sector is primarily comprised of establishments offering foodservice, accommodations, amusement and gambling, performance arts, spectator sports and museums – a long list of businesses that have largely been required to shutter due to the social distancing measures undertaken by most states and municipalities. Moreover, authorities in some areas expect bans on large social gatherings – the lifeblood of this sector – to persist well into the year and possibly beyond. Los Angeles Mayor Eric Garcetti, for example, has indicated that large gatherings may not be allowed to resume until 2021. Additionally, these policies will continue to dampen tourism, which will have flow-on effects for businesses in accommodations and foodservice throughout the year.
While the dismal short-term outlook for these companies has driven widespread layoffs, some businesses are better positioned to stem the tide.
How they’re managing
- Foodservice providers: Limited service establishments are faring better than their full-service counterparts. With takeout and delivery still an option, employment is less affected for these businesses that don’t rely on dine-in guests as heavily. However, disposable income has fallen for many consumers and takeout is often a luxury.
- To adapt, many foodservice establishments have found alternative ways to leverage the supply chains they already have in place by selling groceries and cleaning supplies.
- Accommodations providers: Economy hotels have run the highest occupancy during the crisis, protecting some jobs in this hotel class. Some large hotel chains have partnered with government agencies to generate revenue streams.
- New York City and the state of California are working with hotel operators to house healthcare workers to aid in quarantine measures.
- In other cases, governments such as Fort Lauderdale, FL and the state of California are relying on accommodations providers to house the homeless.
Retailers have been forced to temporarily close all or some of their stores, driving job losses and plummeting revenue. According to the Commerce Department, retail sales fell 8.3% in March and 16.4% in April, the largest declines since the government began tracking the data in 1992. These enormous declines have led to mass furloughs of retail store associates. Best Buy, as one example, furloughed about 51,000 employees, including nearly all part-time workers and some full-time employees in US stores, effective April 19. To cope, a wide swath of retailers in various categories have announced salary reductions among executives and board members. Not all retail is struggling, however.
How they’re managing
- Food & Beverage: With so many people staying home for extended periods of time, food and beverage retail sales increased 25.6% from February to March 2020. In April, food and beverage retail sales remained 12.0% above 2019 figures.
- General Merchandise: Aggregate employment in general merchandise stores, including warehouse clubs and super centers, has grown by 93,400 workers in April alongside sales growth.
- E-commerce: As many have been unable or unwilling to leave home, online retail has boomed. According to the Department of Commerce, sales by nonstore retailers rose 21.6% in April 2020 compared to April 2019.
- Amazon has initiated hiring sprees to add 175,000 workers, Walmart is set to hire an additional 150,000 associates in distribution and fulfillment centers, and Instacart, the popular grocery delivery service, intends to hire 300,000 workers to keep up with demand from those opting to shop from home.
The pandemic has even ailed the healthcare industry, with healthcare employment declining by more than 1.4 million in April. Unlike during the Great Recession, when healthcare employment remained fairly steady, the coronavirus outbreak has imposed additional challenges that have spurred job losses—most notably the social distancing mandates that necessitated a decline in nonessential procedures. The ambulatory care sector, which is made up of outpatient care providers such as physicians’ offices, urgent care and other specialty clinics, comprised 82.0% of April's healthcare job losses. Dentists’ offices were hardest hit; the American Dental Association issued guidance in March for dentists’ offices to close to routine care as a means of preserving personal protective equipment for frontline healthcare workers and reducing the spread of coronavirus.
ProcurementIQ anticipates that demand for healthcare services, and therefore hiring activity in the sector, will rebound more rapidly than in many other areas of the economy. This healthy outlook is largely due to the necessity of many of the affected services. Pending no further restrictions, patients will return to healthcare providers to seek routine medical treatments that have been put on hold, buoying the sector in the coming months as social distancing measures are eased.
How they’re managing
- Front-line Responders: Demand for some types of temporary medical personnel, particularly registered nurses and other front-line medical responders, has grown in response to the pandemic.
- Staffing firm Trusted Health indicated that nurses were being offered contracts at nearly double their typical pay rates in early April, indicating greater demand for their services.
With job losses across most sectors of the economy, demand for most staffing and recruitment services has largely stalled. In April, jobs in the employment services industry fell by nearly 946,000. Employment in temporary help services, specifically, fell by 842,000. The gradual reopening of the economy will provide a boost in hiring activity, though the strict social distancing guidelines that remain in many areas mandate that businesses reduce capacity, slowing hiring efforts as fewer workers are needed for more limited operations in the short term. As such, ProcurementIQ expects recruitment services prices to decline at an average annual rate of 0.5% from 2020 to 2023, revised downward from a previous forecast of 0.2% annualized growth.
How they’re managing
- Diversified Providers: As businesses cope with layoffs and restructuring, growing need for compensation and benefits planning and outplacement services will help sustain demand for diversified HR services firms, aiding larger firms’ financial stability.
The silver lining of the current unemployment situation is that about 78.0% of April’s unemployed workers—a whopping 18.1 million people—reported being furloughed or on a temporary layoff. As businesses reopen, there is a high likelihood that many will be able to return to work over the course of the year.
By: Michelle Hovanetz
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