Biggest job loss ever for retail sector

Retailing may never recover fully as consumers begin to save again

But this recession is showing America something new: For the first time ever, more private-sector services jobs have been lost than goods-producing jobs have been lost. Since the recession began in December 2007, 1.41 million service jobs have been eliminated compared to 1.36 million in manufacturing, construction and mining.

Many of those lost jobs were in retailing, which has seen its largest job losses since the data collection began in 1939. Through December, more than 500,000 retailing jobs were gone, representing a record 3.4% of retail jobs.

Retail companies have stepped up the pace of layoffs since the horrible holiday sales season ended. More than 50,000 job cuts have been announced since Jan. 1 by major retailers such as Circuit City, Home Depot, and Macy's. On Thursday, the chains reported that sales were weak again in January, results that are likely to prompt even more layoffs. See full story.

On Friday morning, the Labor Department will report on its nonfarm payroll estimate for January. Economists surveyed by MarketWatch are forecasting a seasonally adjusted loss of 525,000 jobs, nearly identical to the 524,000 lost in December and the fifth straight month of losses of more than 400,000. See Economic Calendar.
Some economists say many of those jobs will never come back as Americans wean themselves from the easy credit that's fueled their consumption for the past 25 years.

"A lot of them are gone for good," said Nigel Gault, chief U.S. economist for IHS Global Insight, a major economic consulting firm. "The age of the U.S. and world economy being driven by the U.S. consumer may be in the past."

"It's a structural change," said Neal Soss, chief U.S. economist for Credit Suisse. Consumers have had access to easy credit for years, allowing them to increase their spending faster than their incomes grew. As for saving, consumers relied on the stock market or increases in their home's value to provide the funds for retirement or other purposes.

As a result, the personal savings rate fell from about 10% of disposable incomes in 1980 to just 0.3% in 2005 at the height of the housing boom.

"The bloom is off that rose," said Soss. People who were convinced that a 401(k) and a big house were a golden passport to Easy Street have now been disillusioned. Most investors have now suffered through two market crashes in the past decade that have wiped out most of their gains.


Americans will have to start actually saving again, and that means less spending on consumer goods. Less spending on consumer goods means less money going into retailers' coffers. And that means fewer jobs and fewer stores.

"Americans won't have to wear a hair shirt," Soss said, but they'll probably increase their savings rate to about 5% of disposable incomes. Once the recession is over, they'll increase their spending no faster than their incomes grow.
Instead of relying on unsustainable consumer spending leading the way, the economy will have to be more balanced. Consumer spending has increased in importance in the past decades, growing from about 65% of final domestic sales in the late 1970s to about 69% last year.

"We need to become more of a nation of producers rather than a nation of consumers," Gault said. We'll have to be just a little bit more like the Japanese or the Chinese, and they'll have to become just a little bit more like we've been.
More details on job losses

In the first 12 months of the recession that began in December 2007, 2.6 million jobs were lost, or 1.9% of the positions that were filled at the beginning of the recession.

As is usually the case, the goods-producing side of the economy is hurting the most, with employment in durable-goods manufacturing and construction down more than 10% from the peak of employment nearly three years ago. That makes sense, because the first thing people do when they see the economy weakening is to stop buying homes and durable goods. Businesses stop investing in new equipment.

The services sector has lost 1.5% of its employment since the recession began. That's the largest percentage decline since the sharp and nasty recession in 1958 that cost 2.5% of service workers their jobs. By contrast, in the equally nasty recession of 1973-75, service employment actually increased 0.9% during the downturn.

Almost all major service industries have lost jobs in this recession. The trade industries -- retail, wholesale, transportation and warehousing -- have cut 825,000 jobs, including 522,000 in retail, 163,000 in wholesaling and 72,000 in trucking.
The temp-help industry has eliminated 490,000 jobs. The financial sector, including banks and real estate, has lost 148,000, publishing has lost 45,000 and broadcasting 26,000. The hotel and restaurant industries have reduced employment by 136,000. The big winner has been health care, which has added 440,000 jobs. End of Story

Rex Nutting is Washington bureau chief of MarketWatch.