As COVID-19 hit the world in 2020 and through 2021, lockdowns and restrictions became the norm. As a consequence, consumers started buying online, with e-commerce activity increasing exponentially. Demand for goods also increased at this time, leading to supply chains and manufacturing or retail companies bulking up their operations. Dollars were poured into warehousing to increase storage space as well. But in the second half of 2022 and now in 2023, demand has dropped. Thanks to inflationary pressure, various industries are experiencing job cuts and layoffs. Warehousing employment too fell to the lowest level in more than a year as companies slashed payrolls amid a downturn in the goods-moving economy.
The latest preliminary jobs report from the Labor Department reveals that U.S. employers have cut 11,800 jobs in the warehouse and storage sector between February and March. As a result, employment dropped to 1.91 million jobs in March 2023, the lowest number in the sector since January 2022, when companies employed 1.88 million workers.
Previously, the warehousing and storage industry saw a significant surge in employment in the US, with almost 700,000 jobs added from April 2020 to June 2022. This spike in employment was fueled by widespread lockdowns during the COVID-19 pandemic, which led to a surge in online shopping among homebound consumers. At that same time, companies from e-commerce giant Amazon to smaller logistics operators scrambled to fill jobs at fulfillment centers.
The warehousing decline last month came as U.S. employers overall added 236,000 jobs in a labor market that is showing signs of cooling. Goods-producing companies shipping through logistics distribution networks cut payrolls by roughly 7,000 jobs last month, and employment in the retail sector declined by 14,600 jobs.
Real-estate analysis firm CoStar Group Inc. said new warehouse construction starts fell by 24% in the fourth quarter from a year earlier, reaching the lowest level since the start of the pandemic. The decline is affecting what was, during the pandemic, one of the fastest-growing employment markets. In fact, Amazon is throttling back the expansion of its rapid logistics and Walmart has started notifying workers at fulfillment centers across the US of hundreds of job cuts.
Since June 2022, warehousing companies reduced their workforce by almost 50,000 jobs, a trend triggered by overstocked retailers who began paring inventories due to fluctuating consumer demand. Freight demand has also slowed down significantly since the middle of last year due to two overarching trends: Consumer spending shifting from goods to services and large retailers with overstuffed warehouses reassessing their expanded logistics networks.
On the other hand, warehousing jobs are also affected by retailers choosing to boost their e-commerce capabilities. Players like Walmart, for example, are among the many retailers who are outfitting stores to handle more e-commerce business. Adjustment to staffing is a key aspect of this shift. It remains to be seen if this trend will pivot as 2023 continues.