This past week’s November jobs report from the BLS caught many by surprise, with the number of new jobs created in November (263,000, with 221,000 coming from the private sector) exceeding expectations (which were ~200,000 for both total and private). Wage growth for the month also increased much faster than expectations (0.6% for all workers and 0.7% for production and non-supervisory employees vs. expectations of 0.3%).
Markets on Friday reacted to this news in a surprising way, with stocks falling quite a bit pre-market (1-2%, depending on the index, with the Nasdaq down closer to 2%), and Treasuries up 5-8 bps, with the 2 year leading the way. By the end of the day, however, stocks had recouped a lot of their losses and growth stocks (those that tend to be more sensitive to interest rate moves) actually outperformed on the day. Small cap stocks rallied 0.6% on the day. More importantly, the 2 year Treasury yield (which will most closely follow what the Fed is expected to do with interest rates), ended up only increasing by 3 bps. The entire rest of the Treasury curve actually saw yields fall by the end of the day. This is a markedly different market reaction than in prior months when jobs reports came in “hot.” Markets therefore appeared to clearly dismiss Friday’s report, but the question is, why? The answer is likely that November’s jobs report just doesn’t square with almost all of the other macro data points that we have to evaluate the labor market. It also doesn't align with what companies are saying about labor market conditions at the "micro" level either.
To start, let’s show the relevant data from the BLS report from Friday, and put it into context with recent months.
To summarize, new job creation was better than expected, while the unemployment rate and labor force participation rates stayed where they are (both lower than we’d like). Thus, the report indicated that “labor supply” remained tight (indicated by the low labor force participation rate), while labor demand (the number of jobs created) remained robust. This has in prior months been viewed as an issue, because these kinds of labor market conditions are likely to produce higher than desired price inflation. This is why the Fed has been hoping for the labor market to cool, because less money in people’s pockets will likely contribute to less demand for goods, and less demand for goods means companies likely have less ability to raise prices. And less pricing power should produce lower inflation, which is the Fed's focal point right now.
The question then becomes, is it justified for markets to look through the November Jobs report? I believe the below indicators, both macro and micro, say yes to this question. This can of course change, but for the time being, it appears that the labor market has improved (meaning it’s cooled) significantly in recent months, both in terms of the ease of hiring new employees, and the growth with which wages need to increase to both hire new employees and to retain existing ones. November’s Jobs Report I think will prove to be an outlier more than anything else.
To start, let’s look at some of the other key macro datapoints. First is the ADP employment report. This survey (somehow) has had problems tracking the BLS jobs report, but it aligns a lot better with almost all of the other data points than the BLS survey does. Thus, while ADP should be taken with a grain of salt, ADP has visibility into 1 in 6 American jobs, so their data is definitely relevant, even if it doesn’t track the BLS data perfectly.
JOLTS (Job Opening, Layoffs, and Terminations Survey, also from the BLS) generally indicates softening as well. Note that JOLTS is a month behind most other metrics (so the most recent data we have here is for October). Notice the job openings level coming down and also the quits rate coming down too (indicating less people appear to be quitting their job to move to another, higher paying job). Layoffs and firings remain low, however.
Data from Indeed.com paints a similar picture to the JOLTS data. Job openings remain elevated, but have if anything come in in recent months.
Each month or so the Fed releases surveys it does from talking to business participants in each of its regions. These are called the Fed’s “Beige Books.” Below is the commentary from Beige Book surveys back through the end of last year on labor market conditions. Notice how the commentary has changed over the last 12 months, and particularly in the last few.
December (2021) (Beige Book Released January 12th, 2022)
“Employment grew modestly in recent weeks, but contacts from most Districts reported that demand for additional workers remains strong. Job openings were up but overall payroll growth was constrained by persistent labor shortages. Tightness in labor markets drove robust wage growth nationwide, with some Districts highlighting additional growth in labor costs associated with non-wage benefits. While many contacts noted that wage gains among low-skill workers were particularly strong, compensation growth remained well above historical averages across industries, across worker demographics, and across geographies. Besides wage gains, many contacts indicated adjustments to job demands – such as accommodating part-time work or adjusting qualification requirements – to attract more applicants and retain existing workforces.”
February (Beige Book released March 2nd)
“Employment increased at a modest to moderate pace. Widespread strong demand for workers remained hampered by equally widespread reports of worker scarcity, though some Districts reported scattered signs of improving labor supply. Many firms had difficulty maintaining their staffing levels due to high turnover; this challenge was exacerbated by COVID-19 disruptions in January, though workers and firms recovered more quickly than during previous waves. Firms continued to increase compensation and introduce workplace flexibility to attract workers—especially in historically low-wage positions—with mixed success. Contacts reported they expect the tight labor market and consequent strong wage growth to continue, though a few Districts reported signs of wage growth moderating.”
March (Beige Book released April 20th)
“Employment increased at a moderate pace. Demand for workers continued to be strong across most Districts and industry sectors. But hiring was held back by the overall lack of available workers, though several Districts reported signs of modest improvement in worker availability. Many firms reported significant turnover as workers left for higher wages and more flexible job schedules. Persistent labor demand continued to fuel strong wage growth, particularly for footloose workers willing to change jobs. Firms reported that inflationary pressures were also contributing to higher wages, and that higher wages were doing little to alleviate widespread job vacancies. But some contacts reported early signs that the strong pace of wage growth had begun to slow.”
May (Beige Book released June 1st)
“Most Districts reported that employment rose modestly or moderately in a labor market that all Districts described as tight. One District explicitly reported that the pace of job growth had slowed, but some firms in most of the coastal Districts noted hiring freezes or other signs that market tightness had begun to ease. However, worker shortages continued to force many firms to operate below capacity. In response, firms continued to deploy automation, offer greater job flexibility, and raise wages. In a majority of Districts, firms reported strong wage growth, whereas most others reported moderate growth. However, in a few Districts, firms noted that wage rate increases were leveling off or edging down. Moreover, while firms throughout the country generally anticipate wages to rise further over the next year, one District indicated that its firms' expected rate of wage growth has fallen for two consecutive quarters.”
June (Beige Book released July 13th)
“Most Districts continued to report that employment rose at a modest to moderate pace and conditions remained tight overall. However, nearly all Districts noted modest improvements in labor availability amid weaker demand for workers, particularly among manufacturing and construction contacts. Most Districts continued to report wage growth. One third of Districts indicated that employers were considering or had given employees bonuses to offset inflation related costs while in two Districts, workers requested raises to offset higher costs. A quarter of Districts indicated wage growth will remain elevated for the next six months, while a few noted that wage pressures are expected to subside later this year.”
August (Beige Book Released September 7th)
“Employment rose at a modest to moderate pace in most Districts. Overall labor market conditions remained tight, although nearly all Districts highlighted some improvement in labor availability, particularly among manufacturing, construction, and financial services contacts. Moreover, employers noted improved worker retention, on balance. Wages grew across all Districts, although reports of a slower pace of increase and moderating salary expectations were widespread. Employers in several Districts reported giving midyear and off-cycle raises to offset higher living costs, and many noted that offering bonuses, flexible work arrangements, and comprehensive benefits were deemed necessary to attract and retain workers. Looking ahead, employers planned to provide end-of-year pay raises to their workers, but expectations for the pace of wage growth varied across industries and Districts.”
September (Beige Book released October 19th)
“Employment continued to rise at a modest to moderate pace in most Districts. Several Districts reported a cooling in labor demand, with some noting that businesses were hesitant to add to payrolls amid increased concerns of an economic downturn. There were also scattered mentions of hiring freezes. Overall labor market conditions remained tight, though half of Districts noted some easing of hiring and/or retention difficulties. Competition for workers has led to some labor poaching by competitors or competing industries able to offer higher pay. Wage growth remained widespread, though an easing was reported in several Districts. Some businesses said elevated inflation and higher costs of living were pushing wages up, coupled with upward pressure from labor market tightness. Contacts expect wage growth to continue as higher pay remains essential for retaining talent in the current environment.”
October (Beige Book released November 30th)
“Employment grew modestly in most districts, but two Districts reported flat headcounts and labor demand weakened overall. Hiring and retention difficulties eased further, although labor markets were still described as tight. Scattered layoffs were reported in the technology, finance, and real estate sectors. However, some contacts expressed a reluctance to shed workers in light of hiring difficulties, even though their labor needs were diminishing. Wages increased at a moderate pace on average, but a few Districts experienced at least some relaxation of wage pressures. Opinions about the outlook pointed to stable or slowing employment growth and at least modest further wage growth moving forward.”
Here is the data from the US ISM surveys on employment, both manufacturing and non-manufacturing. We’re now in “contraction” territory in each survey, indicating employment is actually falling.
First, here’s the US ISM Manufacturing Employment survey chart.
Now here’s the same chart for services:
Now let’s turn to data from the Regional Fed Surveys. This data is an extension of its Beige Book investigations into business conditions in its districts, except in quantitative form. Though we don’t have great quantitative survey data from every district, here’s the labor market data we do have from the relevant surveys. This data too clearly points towards a softening labor market, both in terms of hiring and in terms of pay (to be clear, this is softer in terms of wage growth, not that wages are actually falling).
Interestingly, despite the weak employment and future sentiment from Phila Fed participants, the special questions asked in the Phila Fed surveys about next twelve months wage growth remains flat at around 5% in both manufacturing and non-manufacturing surveys. Below is a chart showing these results (as well as the expected prices received answer data as well for comparison sake).
Now here’s Chicago Fed Survey Data (which captures both manufacturing and nonmanufacturing firm responses):
And Richmond's:
And lastly, Kansas City's:
In summary, these “macro” data points almost all point to a softening in labor market conditions, directly in contrast with the November jobs report.
Now let's turn to “micro” data points from companies, either from their earnings reports following the 3rd quarter, or from presentations they’ve made at conferences in November or December. The “micro” data generally matches the “macro.” You can broadly bucket the commentary into three categories: companies saying hiring is improving and wage growth moderating (probably 60-70% of comments fall into this bucket), companies saying nothing (which are probably 25% of the sample), and companies saying things are just as bad today as they’ve been all year (I’d say this only amounts to 5-10% of businesses now). Notably, there are a lot of companies that I would have expected to have some commentary around labor market conditions, or at least be asked about it (like Walmart), but weren’t. The fact that many companies weren’t even asked about labor, nor did they feel compelled to bring it up, is likely to be more of a good sign rather than a bad sign. Thus, if we interpret a good chunk of the 25% of companies who didn’t bring labor or wage growth up in this light, we end up with only a small chunk companies still saying labor market conditions haven’t improved. Below are the comments though so you can judge for yourself.
Bank of America (Ticker: BAC) – 10/17/22
The last several months, we've done the fifth share success program. We did our usual merit, we did a 3, 5 and 7 merit increase for everybody under $100,000 in compensation based on years of service. We went -- we accelerated $22 starting wage, which $40-odd (inaudible) a year now. And we'll continue those patterns. And the good news is we're seeing the attrition rate move -- start to move back, it was 12%, dropped to 6%, moved back up to 15-ish and has now dropped down the low 14s and each month it starts to drop even more.
Chemed Corp. (Ticker: CHE) – 11/1/22
Yes, But Nick, I was trying to understand how we should think about next year because some of the health care providers start talking about next year kind of wage inflation would expected and it kind of seems to be oscillate around 4%, 5%. So is this reasonable to you? Or you expect deceleration or you saying more like a high single-digit wage growth? So any color on that expectation into next year will be helpful, too.
Nicholas Michael Westfall Chemed Corporation – EVP
It's a reasonable range. We don't provide that degree of granular guidance because while we'll target at every individual decision is made with guidance down to the leadership level. So that's a realistic range for what we're talking about, but something we feel comfortable with. And we'll obviously discuss once we release 2023 guidance.
Spirit Aerosystems (Ticker: SPR) – 11/3/22
Right. So yes, I mean the issue is that it's -- as we have started to go up in rate, we've had to bring more people on. So for example, we have about 11,000 people in Wichita right now. And we've recalled this year in Wichita about 470 people.
But yes, we've hired in Wichita over 1,900 new people. And so that gives you just an order of magnitude of roughly 2,300 new people, but 1,900 of those were new hires. And what we're seeing is based on history, the level of attrition is just higher than in the past.
I mean, it's gone from about 9% to 12% overall. But what we're seeing is some of the new hires, particularly the entry-level mechanic positions, the attrition rate has actually been even a little bit higher than that.
And so that's -- that kind of took a little bit of us to adjust to that higher level of attrition during Q2 and Q3. We've ended up having to hire more.
I think we're starting to stabilize now. We understand it better. But those are the dynamics, is we've hired now globally over 3,200 new people globally, and 1,900 of those in Wichita.
And with the higher levels of attrition, it's meaning that we've had to go back and hire even more. But those are the dynamics. It's a dynamic environment out there.
As I said, in Wichita, we actually had to increase our starting hourly wage, and we're even offering a signing bonus. But that's helping. The job fairs are helping. And we are getting to the point where we're stabilizing at 31, and we'll continue to work on that as we anticipate higher rates in the future.
Hyatt Hotels (Ticker: H) – 11/3/22
First, we believe it's still too early to say 1 month is not a trend make, that we may have peaked out with respect to wage rate inflation.
It feels like we are headed to something that is starting to feel more stable. I would describe that as part hope and part data. So check in with me in a few months, and we'll talk more about that topic.
Dutch Bros (Ticker: BROS) – 11/9/2022
And obviously, the pricing is in place to mitigate inflationary pressures. I'm just wondering if you can quantify the basket of commodity and labor inflation for the third quarter and maybe what your outlook is for the fourth quarter or more importantly, directionally into 23. Hopefully, we're expecting these things to ease in 23, but any kind of color on the current quarter and the near-term outlook would be helpful.
Our overall year-over-year cost of goods basket inflation in the third quarter was just shy of 11%. Our wage inflation is just below 1% right now. We don't anticipate a lot of change right now. We don't think it's wise to bank on that. But dairy is the -- as we've stated, is a huge driver of that. Over 25% escalation in dairy. Coffee is up or was up in the third quarter, high single digit.
Yes, we're not -- and Jeff, we're not hearing anything that gives us a high degree of hope that things are going to shift any differently anytime soon. I think dairy is projected to stay where it's at until the spring of next year. The [sea] price, we're all watching is starting to come down. And usually, that's helpful. But if you play in the futures game on that, you're out a little bit more on that. So we're watching that. And then I think we'll watch labor. I think labor is the one that we're watching closely. Obviously, we've had a good run with our hiring and one out of every 21 applicants we hire, and that's feeling pretty good. But we're going to have to watch wage inflation as we kind of get through this and get into the first part of the year.
Chemed (Ticker: CHE) at CS Conference – 11/9/22
As we get into what's the price point for hiring different staff in different markets, it is very much market specific. We've adjusted like everybody else has to not only be competitive from a wage standpoint but also be attractive for new hires. And we think we're at a pretty good level right now. We've made those adjustments. Those would all be reflective in our historical earnings.
And so from a trend standpoint, we feel confident given everything that's going out there that we are paying a fair wage. It's proving out by our ability to attract and retain people, and we'll manage it accordingly.
And the other point that we're getting at, which Nick made very importantly, and we're increasing their base salaries in the same general way we've increased them every year. That is a rate that's tied to the increase that we're getting
Community Health (Ticker: CYH) – 11/10/22
And I think about the wage in your base employee levels, I think historically, that was sort of a 2% to 3% number or maybe 3% to 4%, and you stepped it up to 8% to 8.5% in the first half, which is pretty big. And now it's sort of -- you're saying 5%. Do you have any visibility on what that looks like in heading into '23? And you -- do you do one across the enterprise update? Or do you do it sort of market by market?
Kevin J. Hammons Community Health Systems, Inc. – President & CFO
So we do manage that market by market and those occur throughout the year as well. So they don't all hit at the same time of the year. We did see really starting the third quarter of '21 through the second quarter of '22 kind of that 8% to 8.5% had thought we had kind of hit the new normal in terms of base rate, saw it continue at about 5% in Q3, which was more than we had initially anticipated in terms of rate lift. But we're also being aggressive, I think, in bringing full-time labor back in to take out contract labor.
I do think it moderates some. What we've called out for '23 is at this point without great visibility in, but our best guess at this point, that would be something in the 4% range. It's still higher than the 2% to 2.5% we've seen historically but moderating, yes.
Mister Car Wash (Ticker: MCW) – 11/10/22
All of our stores are executing wonderfully and putting out a good car at speed, but unemployment is still low, and the labor market is still stubbornly tight, making competition for the best talent even more challenging.
To continue to attract and retain the best, we've had to incrementally increase starting hourly rates with average non-managerial wages up 6% year-over-year. These wage increases are being offset by improvements to our staffing model, which we call Express 360, where everyone is cross-trained, crews are tightly knit and the team culture of all for one and one for all has resulted in improvements in cars per labor hour, reductions in labor as a percentage of revenue and reductions in our labor dollar per car.
Schneider National (Ticker: SNDR) at Stephens – 11/15/22
Well, for the first part of the question, certainly, we've been in a highly inflationary period as it related to wages, which is -- and we think our customers are being so supportive and they continue to be supportive there. So I don't think the inflation will continue at the rate that we've experienced. I also don't see wage profiles going backwards. I think one of the real nice stories that's come out of this whole difficulty is not only the publicity around the supply chain, the importance of drivers and what it means to the economy has really raised the profile of the importance of that role, and it's introduced new people into the industry. We're in a position to double our women drivers in the market. As I think part of that story is being more visible. We're seeing it in the schools. So I think that's all very, very positive, right?
And wages and getting wages to where they are and where they needed to be, was part of that story. And so that way -- so I do think wages are durable as it relates to that.
HCA Healthcare (Ticker: HCA) at Wolfe – 11/16/22
Got it. Let's talk a little bit about labor. The -- this year, you came into the year expecting a really significant increase versus typical, right? I think your typical expected labor inflation is 2% to 3% on a per adjusted admission basis. Came into the year expecting 4% to 5%. And this -- and it looks like it's going to be closer to 4% than 5% for -- if I'm looking at the model correctly. Next year, you're going to have the tailwind from contract labor and a lot of people have called me and said, like, shouldn't that be a good guy and it is. But I think what you've been trying to communicate is that there's an offset in terms of salaries, just having to -- to get that -- your contract labor off the books, you got to pay a full-time person a little bit more to stick around, right?
So you focused on retention, you're investing in your existing labor force. So what I think you've been saying and I just want to make sure we've read it right, is that the -- it's probably going to be better than it was this year, that 4% to 5%, but probably not back to the 2% to 3%. So it's still going to be a headwind, just not as big a headwind to kind of the normal algorithm that gets you to 4% to 6% growth?
William B. Rutherford HCA Healthcare, Inc. – Executive VP & CFO
Yes. I think that's right. Fall somewhere between our high watermark this year and kind of pre-COVID pandemic. We're really pleased -- a couple of things. One, we're really pleased with the progress we're making on contract labor. We saw almost a 20% reduction sequentially from Q2 to Q3. Half of that was in the average hourly rate and half of that was reduced utilization. And we knew the rate of contract labor would probably be the first step down, and we're continuing to work on utilization as we improve recruitment, reduce turnover and the like. And so we would fully anticipate that trend to continue. And that has given us a little bit of a pay for, if you will, as we adjust our base wages to be responsive to the market.
And overall, I think we can -- and we have managed the overall wage environment, labor environment, I think, pretty well in light of the disruption that occurred during COVID. And as we look forward to '23, we're going to go through our planning exercise. But I think generally, how you characterize it is right. We're probably going to be somewhere in that 3% to 4% range. And we have a lot of tools available to us, whether it be trying to reduce the premium labor, working on skill mix, the fact that it doesn't necessarily come in every market in every cohort.
Tractor Supply Co. (Ticker: TSCO) – 11/16/22
Yes. I'll -- 2 points. On the labor market first. It was highly competitive and significant growth rates in the last couple of years. Tractor Supply got ahead of that early on in 2020 and launched a hiring effort to grow alongside the growth of our business and increase our wage rates. And we've had 2 years of high single-digit to double-digit wage rate growth in the cost structure.
We are positioned well right now from a competitive standpoint in our stores and distribution centers, because of the investments that we've made, because of our culture that we will hire and retain our team members. And because we hire our customers, our turnover rate, by the way, is low as it was pre-pandemic. We have great retention. And because of our investments, our employee engagement scores are all-time high.
I believe that is highly correlated to the fact that our customer satisfaction scores measured by third parties that measure other retailers is at an all-time high. So I really like where we're at. We took some of those COVID benefits of the growth and invested in our team members, and I think it's paying dividends in that aspect now.
Looking ahead, likely to see continued competition for labor. Wages may outpace historical norms, but likely lower than the high single digit and any double-digit numbers. I think they're moderating back down, whether that's mid-single digit or high low single digit type numbers in the next year or two.
But in our current state, in retail and in distribution, frontline team members in competitive wages, I think, are necessary and it's a high priority for us. But again, I think we -- the key investments are behind us in our structural cost structure today.
Shake Shack (Ticker: SHAK) – 11/3/22
Just wanted to quickly follow up on staffing. So I guess it was last week, it was interesting to hear, it's fully indicate that they recently raised the starting hourly wage by about $1 to $3 across roughly 20% of the system. They did that simply to ensure that they could staff those restaurants. So I'm just curious if you've seen a similar potential need in some of your markets, meaning a bump in the wage rate to ensure staffing levels are appropriately met.
Yes. That's absolutely happening, likely at a similar cadence to what you heard them talking about, right? We've already been doing that mid this year, even this quarter. There are some markets we continue to bump up, some certain Shacks who we need to bump up. So yes, you can expect that. Our starting wages have continued to increase for our teams, and we expect that's going to continue into next year. There's no doubt about it.
The inflationary pressure and finding great team members is going to cost more. In addition, as we've said for a little while now, our guests have for a long time asked for the opportunity to tip our teams. With that added functionality, our teams are doing really well, making a few dollars more per hour depending on the Shack and really jumping up their total earnings opportunity to be competitive and above competitive in a lot of ways. So hopefully, that will help turn the tide. It is still a challenging environment out there. There's no doubt about it. and we've got to keep investing in new and different ways. So you can expect continued pressure on our payroll as we look at that into the Shacks next year.
Planet Fitness (Ticker: PLNT) – 11/15/22
Now one other thing that we've heard a lot about while we're looking at this slide is wage inflation. Clearly, it's up. In our legacy clubs, plus or minus, if you look at 2019 compared to midyear this year, our average wage is up about 20%. Not great. Thankfully, that's moderating. Our franchisees experience the same thing in different markets at different levels
US Foods (Ticker: USFD) at Barclays – 11/29/22
As far as wage inflation, as we looked back a year ago where we had higher levels of inflation, and we had done a lot of work in making sure we were benchmarked right from a wage perspective, so we had some higher levels. What we're seeing this year, we think we got it right. We're seeing, broadly speaking, there's always going to be, again, some markets here and there. You have to make different adjustments. But broadly speaking, we're seeing levels of wage inflation return closer to historical levels. And I think that is encouraging as we look ahead to 2023.
Shake Shack (Ticker: SHAK) – 11/29/22
There are some commodities that have taken very big steps up in the midway through this year. So we talked about fries, we've talked about dairy. These 2 big step-ups in the middle of this year. We'll have to see kind of how that market plays out throughout the rest of the year and into next year. But then the one thing that does not look like it's going to be coming down is wage inflation. And we know we have to step up there and support our team members to be fully staffed and open.
I think on the challenging side, I think the labor environment is a structural shift as it will not be solved anytime soon. There just are not enough American workers working in our industry and other industries like them to fill the jobs that are available.
And that means we've got to figure out to be more efficient. We've got to hire differently, better and retain. Turnover and retention are at the most challenging I've ever seen them in my career at every company I talk to will tell me the same thing that they're dealing with those guys dynamic.
Marriot (Ticker: MAR) at Barclays Conference – 11/30/22
And for all of us at the company, that is a huge emphasis as we really come into full recovery. No doubt '21 was a real challenge, right? You were having this incredible increase in demand, people dying to get out and about and a real challenge in getting enough people on property to take care of the guests. That has moderated. While we still have more open positions than we had in 2019, it is meaningfully better than it was in '21. So I think we've seen our guest satisfaction scores increased meaningfully from 2021, and it won't surprise you, we're incredibly focused on it across all the range of the tiers.
So labor is still a challenge in terms of filling the jobs as fast as we'd like, but it is meaningfully better and the wage pressures have also moderated. So there -- clearly inflation is much higher and wage rate's dramatically higher than 2019 and in general, have outpaced inflation in the U.S. and Canada anyway. But we are seeing that come into line where it is much closer now to being like inflation and a steadier stream of applicants and also with the reality that we're doing things differently. We're allowing much more flexibility in our associate scheduling patterns, the ability to kind of choose maybe a 4-day work week instead of a classic 5-day work week that is always 7:00 a.m. to 3:00 p.m. So we're doing our bit as well to demonstrate the attractiveness of working for us as well as the career opportunities, which, frankly, are quite different from some of your classic hourly positions.
So it's moving in the right direction. I would say we're not back yet, and there's obviously -- the industry did suffer with kind of people worrying about COVID. But as you think about people's concerns about a possible recession, I think that also encourages the workforce to be thoughtful about hop skipping and jumping every 6 months.
Ulta Beauty Inc. (Ticker: ULTA) – 12/1/22
While we are not providing guidance for next year on this call, we want to share some high-level thoughts for your consideration as you model fiscal 2023. The beauty category has been stronger this year than expected. Barring a major economic event, we would expect category growth to continue in 2023, albeit at lower rates, reflecting strong consumer engagement with the category, and we remain confident we can deliver comp sales growth in fiscal 2023 within our longer-term targeted range of 3% to 5%.
In this sales scenario, we would expect operating margin deleverage versus our fiscal 2022 guidance. In addition to inflationary pressures on wage rates and other operational expenses, we expect to increase investment spending related to our strategic priorities, reflecting timing shifts from fiscal 2022 and the planned ramp-up of key IT and supply chain investments.
Wage pressure will continue. Fuel will probably moderate, right? We've seen that here more recently. Supply chain investments will ramp up next year. And of course, UB Media will accelerate, will step up there. So ramp-up will contribute on the margin line, gross margin line.
In SG&A, we got store payroll upward pressure on wages, which we expect to continue, maybe not to the same rate we've seen here this year, but certainly will continue upward.
Dollar General Corp. (Ticker: DG) – 12/1/22
And just structurally, we feel we're well positioned in terms of -- as we look at wages, we feel we're well positioned in terms of applicant flow and staffing levels. We feel we're investing appropriately in the business. We feel that our pricing is very appropriate.
Cracker Barrel Old Country Store (Ticker: CBRL) – 12/2/22
Wage inflation for the quarter was 8%.
We now expect wage inflation of approximately 5% to 6% for the fiscal year. We believe wage inflation peaked in Q1 and anticipate lower inflation rates for the remainder of the year.
Genesco (Ticker: GCO) – 12/2/22
Regarding wage pressure, the competitive environment and legislated increases in minimum or living wages continue to pressure our store selling salaries and warehouse costs. In addition, the competitive environment for talent, in general, is increasing our other compensation costs, especially for IT talent to drive our initiatives. In summary, deleverage from these expenses more than offset leverage from occupancy and lower performance-based compensation.
After leveraging expenses last year, we are facing cost pressures in the current inflationary environment across our business, but particularly, as I mentioned, in areas related to attracting and keeping talent and wages in our stores, distribution centers and corporate center.
Okay. That's helpful. And then a question on the wage inflation, the pressure there. I'm just wondering if you see any potential light at the end of the tunnel there? I mean I don't know that minimum wage rates are going to go down, but maybe if we end up in a slightly less competitive labor market, could that potentially help that situation? And then I have one last question.
On wages, we have been really -- I think that the biggest pressure of late has been just competitive pressure. I think we all came out of the pandemic, and we're looking to hire people because our businesses -- to drive our business. And we have seen some good abatement in that overall pressure to bring talent on board in the last few months. And just given where the economy is right now, we think there should be less competitive pressure going forward.
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