Retailer Daily

Retail Trade Employment Stagnates in July – Update

Retail trade employment remained flat for the fourth straight month in July 2010, and the overall unemployment rate was unchanged at 9.5%, according to the Bureau of Labor Statistics (BLS).

Retail Employment Stagnates

Retail trade employment, which has undergone some heavy losses since the beginning of the current recession in December 2007, trended upward in the first quarter of 2010 before slowing in April and continuing to show flat performance. The retail industry has added few or no net employees since April 2010. Earlier this year, retailers added 42,000 jobs in January 2010, and then added a few thousand jobs in both February and March 2010. March 2010 had slightly more jobs added than February.

This is in stark contrast to the period between January 2008 and October 2009, when the retail industry shed jobs every month, peaking at about 120,000 job losses in October 2008. November 2009 reversed this trend with the modest addition of about 8,000 department store jobs. These gains were offset by the loss of 15,000 general merchandise retailer jobs in December 2009 before retailers began consistently adding jobs in January 2010.

Unemployment Stays 9.5% Despite Census Job Losses

Overall, the official U.S. unemployment rate remained flat at 9.5% in July 2010. The U.S. economy shed 131,000 non-farm payroll jobs in July as federal government employment fell with 143,000 temporary workers hired for the decennial census completing their work. Private-sector payroll employment edged up by 71,000, however.

Similarly, the U.S. economy shed 125,000 non-farm payroll jobs in June 2010, reflecting the loss of 225,000 temporary Census jobs.  Total private employment edged up during the month by 83,000 jobs due to modest increases in several industries.

Prior to June, the U.S. economy added 431,000 non-farm payroll jobs in May 2010. This marked a significant improvement from 290,000 non-farm payroll jobs added in April 2010, as well as 162,000 non-farm payroll jobs added in March 2010. In addition, 36,000 non-farm payroll jobs were lost in February 2010 and 20,000 lost in January 2010.

However, tempering this May increase in new jobs was the fact that 411,000 of them were temporary workers hired to assist the 2010 Census. Private-sector employment changed little (41,000 jobs added).

Actual Number of Unemployed Persons Higher

The July 2010 unemployment rate reflects unemployed persons actively looking for work. According to the BLS, it stood at 5% when the recession began in December 2007. Since that time, the number of unemployed persons has increased about 89.6%, from 7.7 million to 14.6 million.

Looking beyond these numbers, many more Americans are unable to find work than those counted in the official unemployment figure. The civilian labor force participation rate, which is the proportion of the non-institutionalized civilian population age 16 and older serving in the labor force, marginally fell from 64.7% to 64.6%. This figure stood at 66% in December 2007. The employment-population ratio, which measures the ratio of employed persons to the total non-institutionalized civilian population age 16 and older, also edged down from 58.5% to 58.4%. It stood at 62.7% in December 2007.

Several other pieces of unemployment data show mixed signals about the U.S. job situation. These include:

• The number of employed persons working part-time for economic reasons declined by 1.1%, from 8.6 million to 8.5 million.
• About 2.6 million persons were marginally attached to the labor force, up 15% from 2.26 million in July 2009. These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the four weeks preceding the survey.
• Among the marginally attached, there were 1.2 million discouraged workers, a 48% increase from 811,000 discouraged workers a year earlier and 46.1% of total marginally attached workers. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The other roughly 1.4 million persons marginally attached to the labor force last month had not searched for work in the four weeks preceding the survey for reasons such as school attendance or family responsibilities.

Employment Trends Index Grows Slowly

The Conference Board Employment Trends Index rose 0.3% in July 2010, from a score of 96.7 to 97. This marks the 14th straight month the Employment Trends Index (ETI) has risen, signifying what the Conference Board says will likely be continually declining job growth.

Prior to this most recent growth spurt, the ETI declined every month between January 2008 and April 2009. It then remained essentially flat from May – August 2009 after 20 straight months of decline. A score of 100 equals the Employment Trends Index’s level in 1996.

This month’s increase in the ETI was driven by positive contributions from six out of the eight components. The improving indicators were: Initial Claims for Unemployment Insurance, Percentage of Firms With Positions Not Able to Fill Right Now, Part-Time Workers for Economic Reasons, Job Openings, Industrial Production and Real Manufacturing and Trade Sales.

Gad Levanon, Associate Director, Macroeconomic Research at The Conference Board, said the sharp decline in the ETI during the past three months suggests employment growth will remain too weak to keep up with the increase in the working age population. “The disappointing employment numbers may indicate that the low levels of household spending and confidence are making businesses more cautious when it comes to hiring,” Levanon said.

Employment Trends Index Aggregated Indicators

The Employment Trends Index consists of eight aggregated labor market indicators:

• Percentage of respondents who say they find “Jobs Hard to Get” (The Conference Board Consumer Confidence Survey)
• Initial claims for unemployment insurance (U.S. Department of Labor)
• Percentage of firms with positions not able to fill right now (National Federation of Independent Business)
• Number of employees hired by the temporary-help industry (U.S. Bureau of Labor Statistics)
• Part-time workers for economic reasons (BLS)
• Job openings (BLS)
• Industrial production (Federal Reserve Board)
• Real manufacturing and trade sales (U.S. Bureau of Economic Analysis)

The aggregation of these eight components into the Employment Trends Index (ETI) is constructed so that all components are equally weighted and volatility adjusted so that no single component can dominate the index. The volatility adjustment is done by calculating standardization factors determined by the standard deviation of the monthly percent change in each component. The period used for calculating the standardization factors begins in 1973 and ends at 2007. The standardization factors are then used to construct the index from 1973 to 2008. According to the Conference Board, the ETI typically leads unemployment figures by two months.