Brick-and-mortar retail stores reached a tipping point in March jobs report
JC Penney employs as many people as the entire coal mining industry, about 100,000 (and declining). Maybe we should start paying more attention to the hits retail is taking, as seen in today’s jobs report.
While many economists called the March numbers from the Bureau of Labor — with a sharply lower number of jobs created than anticipated, but the lowest unemployment rate since May 2007 — muddled, one trend was clear: traditional brick-and-mortar retail has reached a tipping point.
“We know this is a trouble spot,” said Mark Hamrick, Bankrate.com’s senior economic analyst. “We know that job cut announcements were the top category in the first quarter. That just means there’s more pain to come.”
Retail is a huge force in the labor market, accounting for as many as one in four jobs, according to the National Retail Federation. The sector shed 30,000 jobs in March, including a falloff of 35,000 in general merchandise stores alone, following the loss of 26,000 retail jobs in February.
“We’re seeing a transition towards ecommerce,” said Nicole Smith, chief economist at the Georgetown University Center on Education and the Workforce. “Amazon has really caused a change in the way many people shop.” The internet retail giant has said it will hire 100,000 U.S. workers this year, mostly in warehouses and customer service.
“The holidays sent a clear message that at this point, we’re moving towards a post-recovery world where online is a really strong preference,” said Doug Hermanson, principal economist at Kantar Retail. “Certainly we’re seeing in retail headwinds into 2017, especially given brick-and-mortar performance.”
Robert Johnson, director of economic analysis at Morningstar said changing demographics are also responsible for the sector’s woes, as boomers downsize and millennials remain slow to put down roots. “In general, it’s made it a tougher market for anybody that sells goods versus services,” he said.
Even with Amazon’s corresponding push into warehousing and logistics, “It’s not going to make up for the losses in brick-and-mortar,” Hamrick said. Even though the embrace of ecommerce is also occurring within traditional chains, in some case it’s a bit belated.
“To some degree it is about changing their investment strategy,” Hermanson said.
Analysts say ecommerce fails to create an offset because there is a mismatch between the kinds of jobs an ecommerce investment ramp-up creates and the ones that disappear when mall anchors and shopping center stalwarts close their doors.
