THE SHOP

January '20

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12 THE SHOP JANUARY 2020 with uncertainty about the future, is having an ill effect on capital investments. "Manufacturers are nervous, despite their success in reaching their earnings estimates," says Bill Conerly, principal of his own consulting firm in Lake Oswego, Oregon (conerlyconsulting.com). "This is showing up in capital spending numbers, which were big in 2018 coming out of tax reform but which are not so big now." Even forays into automation are on hold for many businesses. "Labor costs are going up and good workers are hard to find," says Conerly. "Interest rates are low, and companies are flush with cash. You would think that investment in labor-saving technology would be going great guns, but it's not. Why? Uncertainty. Businesses wonder if economic conditions in the next few years will justify more capacity or even more efficiency." The numbers from Moody's support Conerly's observations. "We expect real nonresidential fixed investment to grow by 3.2% annualized in 2019 and 2.8% in 2020," says Koropeckyj. "That's well below the 5.4% average over the last two years." TIGHT LABOR If robust employment is making cash regis- ters ring a merry tune, the same tight labor market is creating headaches for retailers looking to fill their ranks with capable workers. Although low unemployment has not yet had an appreciable effect on labor costs, retailers face the prospect of rising wages. "In 2020, retailers will be challenged to find enough workers and hire them at a reasonable rate," says Hoyt. The retail experience reflects a larger issue everywhere in American business. "Because of the tight labor situation, our companies have not been able to add as many workers as they would like," says Palisin. "As a result, it can be difficult for many of them to take on new business. We expect that to remain a problem in 2020." Retailers are also seeing more job shifting, in which people leave current positions for opportunities elsewhere. "Employers are now looking at whether they need to adjust their compensation policies to retain the talent they have devel- oped," says Palisin. If you can't get enough people, let robots do the work. That's the mantra for the employer of the future. "Rather than invest in recruiting and training people for labor-intensive jobs, our members have been investing in automa- tion technology," says Palisin. "We expect this trend to continue in 2020." Technology can help fill the gaps in employee staffing. The secret is to intro- duce innovative tools for interfacing with customers in productive ways. "Retailers need to get a hold of tech- nology in 2020 more than ever before," says Anne Obarski, director of Merchan- dise Concepts, a retail consulting firm in Dublin, Ohio (merchandiseconcepts.com). "They can start by identifying customer pain points, and then seeing how tech- nology can help resolve them." Innovative ways to streamline the shop- ping experience can relieve customer stress, says Obarski. And a presence on Insta- gram and YouTube can help customers shop more efficiently and quickly access needed product information. The challenges of a tight labor market are expected to be with us a while. "The workforce will be put under con- tinuing pressure in the future," says Palisin. "Over the next 15 years, for the first time in the U.S., there will be more people of retire- ment age than under the age of 18. And a contraction in immigration is also put- ting pressure on the workforce. Employers will have to look for other ways to grow without hiring workers who might not be available." Although low unemployment has not yet had an appreciable effect on labor costs, retailers face the prospect of rising wages. Retail Forecast 2020 Once unemployment starts rising, we are either already in a recession or will be in one very soon.

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