Consumer spending is shifting from goods to services

The Covid-19 pandemic was a boon for e-commerce retailers and their suppliers, as people around the world stayed home and consumed goods that could arrive on their doorsteps. As the world has reopened for business, people have finally been leaving their homes for restaurant meals, spectacles, and other services. And we can see how staffing needs have changed with this shift in the economy.

A surge for in-person services

Between the first quarter of 2021 and the first quarter of 2022, overall spending by consumers rose by 4.8%, adjusted for changes in prices. But spending on goods rose by just 1.0%, while spending on services jumped by 6.9%. And within the services category, spending on transportation rose by 26%, recreation by 22%, and food and accommodations 20%.

If anything, this trend seems to be picking up speed in the second quarter of 2022. Our Monthly Labor Market Report for May 2022 showed gains in hourly pay for these in-person service roles since the end of the first quarter:

+3% Concession/stand worker, dishwasher, event server, event setup/takedown

+2% Busser, counter staff/cashier

+1% Bartender

In the same period, hourly pay on our platform for industrial and logistical roles including general labor and warehouse associates was flat.

We can see the change in the shifts booked on our platform as well. Here are the ratios of shifts booked in hospitality (caterers, restaurants, and venues) to light industry (retail and merchandising, transportation and logistics) across four major metropolitan areas since January 2021:

1 Jun 2022 spending shift ratio for Atlanta, GA

1 Jun 2022 spending shift ratio for New York, NY

1 Jun 2022 spending shift ratio for Chicago, IL

1 Jun 2022 spending shift ratio for Bay Area, CA

In Atlanta, the ratio of shifts booked in hospitality to light industry grew steadily until the onset of the Omicron wave of the pandemic, from which it hasn't yet recovered. But in New York, the lull over the winter has turned into a sharp uptick in hospitality shifts during the spring. The trends is more pronounced in Chicago and similar (if on a slightly different scale) in the Bay Area. Again, much of this change has occurred in just the past few months.

Resilience in staffing amidst the change

We might also ask whether this change in the composition of consumers' spending has affected the urgency of staffing needs. During the Omicron wave, we saw peaks in short-notice bookings when call-outs increased. But that doesn't seem to be the case here:

1 Jun 2022 short notice shifts by sector

Short-notice bookings generally declined on our platform in the first half of 2021, but they began to increase into the fall and winter. At the height of the Omicron wave, we saw a spike in short-notice bookings for light industrial shifts and a corresponding drop in urgency for hospitality shifts. Since then, however, short-notice bookings have essentially leveled out.

We attribute this phenomenon in part to the behavior of businesses using our platform. Businesses have been building their rosters of Instawork professionals, and many can call on trusted workers well in advance of shift times. Also, the recent addition of long-term assignments on our platform has allowed businesses to fill their shifts for weeks at a time. We hope that these features will help businesses to manage their staffing needs in this transformative time for the economy.

Realtime metrics

These metrics, derived from data aggregated across the Instawork platform, compare the two weeks starting 5/7/2022 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:

  • $0.17 drop in hourly pay

  • 1.0% point drop in share of short-notice shifts

  • 1.4 hours drop in hours per existing worker

To receive future briefings and data insights from our Economic Research team, please subscribe below. Follow Daniel Altman on Twitter at @AltmanEcon or on LinkedIn.

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