Retail employment numbers keep coming up short, a sign of tighter cost control by retailers, and perhaps worse service.
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July 5, 2007
NEW YORK - If you want to see where the jobs aren't, go shopping.
Retail employment has consistently disappointed many forecasts for job growth, even as U.S. consumers keep shopping and retailers open more and more locations.
As the Labor Department prepares to release its June jobs report Friday, the forecast is that employers added 125,000 jobs to payrolls during the month, down from 157,000 in May. The unemployment rate is forecast to remain at 4.5 percent.
But the retail sector likely won't be adding to those jobs numbers.
Since the start of 2006, just over half of the months have seen a decline in jobs in the sector, and general merchandise stores, which includes department stores and retailers, have seen the loss of 16,300 jobs over the 12 months ending in May.
By comparison, the real estate industry has added 24,200 jobs in the same period, even as home sales plunged.
"Retail is one of those sectors where you look at job performance and scratch your head," said Michael Niemira, chief economist, International Council of Shopping Centers. "I haven't found anything that really fits. It's a very funny pattern, one that seems to defying the broader retail pattern of demand."
Niemira said that part of the weak retail employment numbers is due to the relatively low unemployment rate overall.
"Quite honestly the story you hear from retailers is that it's hard to hire," he said. "Is the labor shortage the real story here? Maybe."
Retail sales snap back -- and then some
But Richard Hastings, senior retail analyst with Bernard Sands, believes the relatively low employment numbers in the sector are a result of faster growth among wholesale club or big box retailers, whose business models call for there being fewer employees on the floor to help customers.
"The demand for in-store service is limited to certain specialty stores, and they don't represent the dominant dollar share of the industry," he said.
Hastings also points to improved software to help retailers better align staffing to periods of peak customer traffic. That kind of change in employees' hours got a lot of attention when Wal-Mart Stores, the world's largest retailer and the nation's largest private sector employer, implemented it.
"It's becoming a common practice, it's not unique to Wal-Mart," said Hastings. "The industry has become much more technologically advanced than they were several years ago."
He said that retailers are also outsourcing some jobs to their suppliers, having vendors send their own employees into stores to restock their inventory themselves.
"The retailers also are not ordering as much inventory, which means there is not as much to straighten up and move around within store," he said. "That reduces staffing needs even further. The bottom line is these jobs are not coming back."
Hastings and Roz Wells, chief economist for the National Retail Federation, said that limiting employees not only translates into lower costs for retailers, but also lower prices in many cases for customers.
"Retailers are always looking to keep those [labor] costs down, that's their biggest overhead," said Wells. "Wherever they can get away with less labor they're going to try to do that."
John Silvia, chief economist for Wachovia, points to the growth of Internet shopping as cutting down on retail employment as well. Not only are brick-and-mortar chains shifting some of their sales to online, which cuts the need for staffing, but even shoppers who are still buying at stores are doing much more of their shopping and comparing of goods and prices online.
"That also keeps people off the floor, because you don't need as many people to serve them," he said.
But Silvia also believes that shoppers are paying the price for less retail employees available to help them.
"When was the last time you went to one of these places and got good service?" he said. "It's long lines at the checkout, people not really available to answer questions, basically lousy service."
Hastings said that retailers need to make sure that they keep enough staff at checkout, where a customer is likely to walk out without completing a purchase if the line is too long. But he said that customers are more likely to put up with the inconvenience of not having sales people on the floor, although there can be some lost sales if the retailer has a item that a customer wants but can't find.
The Retail Federation's Wells agrees that there is a risk to retailers if they cut staffing too deep.
"Each retailer has to walk a fine line between having the right number of people out there and keeping their costs under control," she said.