Will Low Unemployment Lead to Lousy Customer Service?

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A low unemployment rate generally gives workers more options, and while that's great for people who need a job -- or a better one -- it can have some less-ideal consequences for us in our roles as consumers. A shortage of workers can lead to unfilled positions, people landing roles they're not quite qualified for, and training gaps as workers job hop.

"Companies will likely struggle to fill open positions with quality workers during this holiday season," wrote American Customer Satisfaction Index Research Director Forrest Morgeson in an email interview with The Motley Fool. "The unemployment rate has hovered between 3.8% and 4.1% this year, and it's the lowest range since the latter part of 2000. This leads to a tight, competitive labor market where workers are always on the lookout for a better job."

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Even when companies manage to land the workers they need, that doesn't mean their worries are over. Almost 3.6 million people quit their jobs in July alone, according to Morgeson.

Trouble for the holidays?

The ACSI, which measures customers' opinions about 46 industries across 10 economic sectors, has data that shows a correlation between a tight job market and worse scores on customer satisfaction, and those customer service issues can even impact economic growth over time. It's sort of a ripple effect, Morgeson explained.

"The high number of workers quitting their jobs and moving to new positions lowers customer satisfaction because their replacements have less experience and less job-specific training," he wrote. "This is particularly seen in many customer-facing industries, including retail, which hires in large numbers leading up to the holidays."

However, so far in this cycle, customer service has not been impacted. The data for the second quarter of 2018 pegged overall customer satisfaction at its second-highest level since the ACSI started tracking it in 1994.

"That's quite the standard for companies to meet going into the holiday season with a high turnover rate, especially when companies are already having trouble filling positions," Morgeson added.

What can be done?

In Morgeson's view, employers have a choice beyond simply accepting that a tight labor market and heavy turnover will lead to less-satisfied customers. "If businesses can successfully implement advanced IT, automation techniques, and related technologies, they might be able to stave off a drop in customer satisfaction," he wrote. "Additionally, businesses with stronger employee training and retention programs are likely to fare better."

Building loyalty programs can also keep customers happy, and can be used to encourage people's input. That helps companies learn about problems before they become widespread.

"These investments in technology, employees, and customers need to happen now -- before the holiday season is in full swing," Morgeson cautioned.

History may not repeat itself

Looking back to the late 1990s, early 2000s, and 2016, "there were periods of low unemployment rates and sustained customer satisfaction as measured by the ACSI, but then customer satisfaction dropped because of job hopping," Morgeson wrote.

A similar slide could take place during this holiday season, but it's possible some companies will avoid that fate.

"New automation software and algorithms are hitting the market every day that can improve retail processes and streamline customer interaction," Morgeson wrote. "Whether this tech will impact customer satisfaction for the better depends on businesses' rate of implementation and how much more the technology can improve in the next two to three months."

What's clear is that without action, it's reasonable to expect that many companies' ability to keep their customers happy will decline. That means that this winter's big winners are likely to include companies like Walmart and Target, which have been aggressively adding productivity/customer service technology, increasing training, and raising wages and benefits to retain the workers they already have.

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