Key takeaways
One of the biggest stories in the economy last year was the swing of consumer spending away from goods consumed in the home and toward services consumed outside the home. As the economy opened up, billions of dollars flowed into leisure, entertainment, and travel. Spending on food services and accommodation grew by 5%, adjusted for inflation and seasonality, in just six months. Will it happen again this year?
There are reasons to doubt a recurrence. Last year, consumers had a lot of pent-up demand for services outside the home – some even called their spending "revenge" for the pandemic. Consumers also had a lot of extra savings to fund that spending, perhaps as much as $2.4 trillion by the end of 2021. But this year, demand is expected to ebb while consumers feel the bite of higher prices and interest rates in the midst of an uncertain economy. Moreover, almost half of those excess savings have now been spent.
Thanks to the transactions on our platform, we have a realtime view of labor demand in services industries. Last year, demand for in-person shift work by businesses classified as "Accommodation and Food Services" or "Arts, Entertainment, and Recreation" was 43% higher in March than the average for January and February, and 104% higher in April. This year, demand in these industries across our platform is only 8% higher in March, with a week left in the month and many shifts already booked in advance.
The numbers above are calculated across our entire platform, covering all our major markets in the United States and Canada. If we look in more detail, market by market, then the picture gets a little clearer. Here are all the markets where shift bookings by our Partners have increased by at least 50% so far in March versus the January/February average:
Market Change
* newly launched market
All of these markets are in warmer places. We might expect these markets to have the earliest surges in spending on services, since areas further north are still chilly in March. And several of these markets are destinations that tend to see a big increase in shifts around the traditional Spring Break time.
Yet some southern markets are basically trundling along at the same rate in March as they were in January and February. Here's a selection:
Market Change
These markets are also on the warmer side, but they're not the most popular Spring Break destinations. Los Angeles might be the exception, and we included it in our Spring Break analysis a couple of weeks ago. Yet what we saw there in 2022 may actually have had more to do with the overall surge of spending on services and less to do with Spring Break travel. Overall, it seems like Spring Break is giving places like Tampa and Miami an extra boost, but most places aren't seeing a surge like the one last year.
In 2022, the surge of spending on services coincided with an avalanche of interest in flexible work. Labor supply grew dramatically as more people signed up for platforms like Instawork. Our network had expanded from 1 million to 2 million Pros between March 2021 and March 2022, but by July 2022 we were already at 3 million.
As a result, there was very little change in hourly pay across our platform. We had seen some sharp increases in 2021, as the labor market tightened. But in 2022, the pay rates in the industries featured in this analysis were almost identical in March to what they had been in January and February – in fact 1% lower, on average. In April 2022, they were 2% higher.
This year, we're seeing even less of an effect on pay. Our network has now surpassed 4 million Pros, and hourly pay in March has been 2% below the average for January and February. To be sure, changes in the mix of roles booked by our Partners may have affected these numbers. But to the extent this mix is similar this year to last year, there seems to be no unusual pressure on pay.
The story is a little different in goods-related industries, however. In 2022 they were caught flatfooted when demand shifted to services, and inventories mounted as goods stayed on shelves. But this year, demand is more stable, especially as inventories return to more normal levels. And we're already seeing pay rates rise for higher-skilled roles.
Our outlook for this year has always spoken about greater stability and a balance of consumer spending that looks more like its pre-pandemic norms. That's what we're seeing so far this spring in leisure and hospitality – stay tuned for more on our other verticals soon.
Realtime metrics
These metrics, derived from data aggregated across the Instawork platform, compare the two weeks starting 3/9/2023 to the previous two weeks. To control for the overall growth of the Instawork marketplace, only shifts involving businesses that booked shifts in both periods are included:
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