Key takeaways
- Demand for flexible labor suggests a recovery could be on the way, starting in manufacturing.
- Short-term spikes in labor demand are sending pay rates higher in manufacturing as well.
- The recovery looks uneven so far, with the most activity in the West and the least in the East.
Last year was a tough one for industrial businesses, as demand for goods stalled and record inventories built up throughout the supply chain. Making matters worse, lots of businesses had finally hired enough workers to cope with the strong pandemic-era demand that they thought would continue through 2022.
They overshot, and they were left with idle resources. Hours came down, and supply chains around the world relaxed after a torrid couple of years. But businesses didn't want to let go of their new workers, lest they needed them when fears of recession ebbed and demand returned. Now, we're seeing a few signs that the return is on the way.
Start at the beginning
How does the supply chain work? First, raw materials need to be obtained and shipped to factories. Then factories do the manufacturing. After that, goods go out to wholesalers and lastly retailers. Lots of raw materials used in the United States come from outside the country. So if we're looking for signs of life in the supply chain here, we should probably look at manufacturing and logistics first.
Here's how shifts booked on our platform have evolved in these industries this year:
Manufacturing took its seasonal tumble early in the year, but it had a sharp uptick in May. Transportation and warehousing shifts have been growing steadily since March. We wouldn't have expected too much activity in wholesale and retail trade yet, but demand for flexible labor in those industries also bounced back a bit in May as inventories shrank.
Hourly pay also rose sharply in manufacturing in May, on average, following the sudden increase in labor demand. Here's a comparison for general labor shifts in the various industries:
In transportation and warehousing, where the growth of labor demand has been more gradual, pay held steady through the spring. The same was true in wholesale and retail trade. As always, short-term fluctuations in supply and demand have the biggest effect on prices, whether for labor or anything else.
An eastward tide?
Despite the promising signs, the recovery in industrial activity hasn't happened in to the same degree – or sometimes at all – in every part of the country. Out west, there have been some big increases in labor demand in manufacturing:
The Phoenix area is particularly notable, since it's been a big beneficiary of investments in high-tech manufacturing. Manufacturing shifts booked on our platform have more than quadrupled there since January. But even in the Bay Area, our first and most mature market, we've seen an increase of more than 50%.
Looking at the Midwest, the pattern has essentially matched the national trend, with a seasonal dip and then a recovery – especially in the Dallas area:
Demand for flexible labor could spike soon in Chicago, too, since the labor supply is so tight to begin with for this kind of work. By contrast, we haven't seen much activity in the East, with a no recovery in sight for the Atlanta and Philadelphia areas:
So it's possible that a manufacturing recovery might be led by tech-focused businesses, moving from West to East as activity snowballs in the entire sector. We should see a more even trend by the end of this year, when the holiday season is likely to follow pre-pandemic norms more closely than in any of the past few years. Either way, industrial businesses that use flexible workers – and most now do – will have the most agile responses to changes in demand.
Realtime metrics
These metrics, derived from data aggregated across the Instawork platform, compare the two weeks starting 6/22/2023 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:
- $0.06 rise in hourly pay
- 1.7% point drop in share of short-notice shifts
- 2.4 hours drop in hours per existing worker
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