The holiday season is usually a reason for stores to staff up to handle the surge of shoppers. But Friday’s jobs report showed a concerning trend: Retailers are shedding workers.
According to the Bureau of Labor Statistics, the retail sector lost 30,000 jobs in November. That figure is even worse if you don’t count the 10,000 jobs added in November by car and auto parts dealerships, which are included in the sector’s count. General merchandise stores logged 32,000 job losses, electronics and appliance stores saw 4,000 job losses, and home furnishings stores had 3,000 job losses.
The contrast is striking given that Friday’s employment report as a whole showed better-than-expected job growth. The U.S. economy added 263,000 jobs in November, with the unemployment rate holding steady at 3.7%.
It is striking to see such deep cuts in an industry that is expected to account for 8.6% of all U.S. jobs by 2030, particularly when stores have Help Wanted signs in the window. November has traditionally been a period of hiring for retailers. According to the National Retail Federation, the industry typically adds half a million temporary workers to handle Christmas crowds.
Companies are hiring seasonal workers for the Christmas rush, just not as freely as they did last year. While Target’s 100,000 hiring target for the holiday season is the same as in 2021, Walmart plans to add 40,000 associates, a dramatic drop from 150,000 last year. Department stores are also pulling back:
) plans to bring on 20,000 new workers compared with 28,000 last year and
) is looking to hire 41,000 workers, down from roughly 76,000 in 2021.
Moreover, many companies are laying off workers. The world’s two biggest retailers,
) have both announced big cuts, and so have other troubled stores like
Bed Bath & Beyond
). While some of those cuts are on the corporate side, they still speak to a more cautious climate in the industry.
It has been a wild and painful ride for retail this year. Retail stocks are deeply in the red this year, off 28% through Thursday’s close. Recent earnings reports and economic releases show pockets of concern that could help explain the job losses.
Walmart’s upbeat earnings last month included the caveat that shoppers were still reluctant to spend in categories like home furnishings and electronics.
), which gets more of its business from discretionary categories, did quite poorly, with its earnings and outlook missing estimates as management warned customer still weren’t spending freely on nonessentials. Even
‘s latest quarter, which beat expectations, notched a 33% decline in earnings per share from the year-ago period and a decline in gross margins.
Retailers may be feeling the sting of consumers looking for ways to cut back as inflation has hit their pocketbooks and fears of a recession weigh. Indeed, consumer sentiment fell in the first two weeks of November, according to the University of Michigan survey, erasing about half the gains seen since June’s historic lows.
Retailers might also be tightening their belts given that they have borne much of the brunt of higher wages in recent years, and are thus motivated to keep payrolls slim. Retail giants like Target and Amazon boosted their starting wages to $15 an hour years ago. The tight labor market has forced many other retailers to follow suit, if not match that level.
Still, shares of the industry’s companies have rallied ahead of the broader market in the past month, the traditional start of the crucial holiday season. The
SPDR S&P Retail exchange-traded fund
(XRT) gained just under 10% in the past month, above the
‘s 8.4% gain.
Stocks have been bolstered by record Black Friday spending. Sales between Thanksgiving Day and Cyber Monday were $35.27 billion, up 4% year over year, according to Adobe Analytics.
Despite their recent strength, retail stocks remain in a precarious position as high inflation means many Americans have to continue to make tough spending choices, even if they have gotten raises of their own. Wage growth for the past year climbed above 5% in November, according to the jobs report, faster than expected but still trailing the rising cost of living.
As long as those pressures remain, workers who help get gifts under trees might see pink slips.
Write to Teresa Rivas at firstname.lastname@example.org