Economy Watch: The Long-Term Loss of Retail Jobs
- Feb 09, 2015
The Bureau of Labor Statistics reported on Friday that the number of retail jobs nationwide increased by 46,000 in January, which is a good thing, but in fact retail employment trends haven’t been all that strong in recent years. During a time (from 2007 to 2014) when real personal consumption expenditures–people buying things–expanded by $1 billion, and the economy created a total of 2.4 million new private-sector positions, how many of those jobs were in the retail sector? None. The retail sector has lost 60,000 jobs since the beginning of the recession. Retail hiring hasn’t been a part of the recovery.
What does the shrinking labor pool mean for retail space usage? The connection is indirect, since retailers hiring fewer people is a symptom of change in the industry, not a cause of change. But it does point to a retail industry that, on the whole, is making do with less than it used to–fewer employees, for one thing, but also less space. Since the end of WWII, previous recoveries have inspired high levels of retail space absorption, and thus development, as retailers re-hired workers. Not this time. According to Marcus & Millichap, net retail absorption over the four quarters ending in 3Q 2014 totaled nearly 60 million square feet, which is the strongest pace in six years, but it’s still less than half of the annual average from 2000 to 2007.
Some of that represents the normal pattern of retailers dying, of which there’s no shortage of examples. Just last week, after all, RadioShack effectively kicked the bucket, to no one’s surprise. The office supply industry is quickly shedding workers as it consolidates into one chain, Staples. Department stores, except for some specialized upper-end chains, are quickly becoming a thing of the past. Other retailers are downsizing their phyiscal stores. For instance, grocery stores, which were in a hurry to expand in the ’90s, are now doing the reverse. In the third quarter, grocers closed 2.7 million square as more specialized (and smaller) stores are coming into vogue, such as ethnic cuisine, gourmet shops, organic specialists and limited-service discount.
Even if the economy continues to improve and wages start to grow again, that isn’t going to change the new fundamentals of retail. The new fundamentals don’t mean that retailers are going to quit using physical space to sell their goods. Even technically enabled, Amazon-shopping Millennials like go out shopping sometimes. Still, the new retail landscape is shaping up this way: the total amount of retail space probably isn’t going to get much larger; it will be devoted increasingly to certain kinds of stores at the expense of others (high-end and low-end will continue to squeeze the middle); and new and interesting concepts will be the key retail properties’ health in the coming years.