WASHINGTON — Discounters and specialty retailers, anticipating a boost in consumer spending driven by one-time tax rebate checks, added jobs to payrolls in June, while department stores and apparel and textile manufacturers continued to cut back, the Labor Department reported today.
General merchandise stores, a category that includes discounters like Wal-Mart, bucked the national trend of weakening employment, posting a gain of 8,900 jobs in June to employ 2.936 million, while apparel and accessories stores added 900 jobs to payrolls last month, bringing the total number of positions to 1.49 million.
Meanwhile, department stores trimmed 600 jobs to employ 1.514 million, reflecting a pattern of consolidation and aggressive competition from mass merchants.
The manufacturing sector, locked in a downturn spanning decades, continued to shed jobs in June. Domestic textile producers cut 4,900 jobs in the month, driven largely by losses at textile mills that make apparel fabric, which cut 3,200 jobs to employ 151,900. Textile product mills, which primarily produce home furnishing textiles, cut 1,700 jobs to 149,900 positions.
In the overall economy, employers cut a total of 62,000 jobs in June, marking the sixth straight month of jobs losses nationally, in line with most economists’ expectations. The unemployment rate remained unchanged at 5.5 percent.
“The report can’t be seen as good news,” said Nigel Gault, chief U.S. economist at Global Insight. “Private payrolls fell 91,000, with losses widespread across manufacturing, construction, and private services with the exception of health, education and food services.”
Gault said that while the unemployment rate held steady in June, it was still bad news because most economists felt the spike in May that brought it to 5.5 percent was an anomaly.
While it is still too early to tell how consumers will use their tax rebate checks provided by the government to provide a jolt to a faltering economy, many retailers didn’t want to get caught off guard.
“It’s pretty telling that Wal-Mart beefed up their staffing in anticipation of a wave, and more appropriately, a tsunami of government rebate checks that were going to be spent at the discounters,” said Richard Yamarone, chief economist at Argus Research Corp. “General merchandise stores did the best simply because they were out promoting government rebate checks many months in advance.”
Yamarone said the middle-line retailers continued to take it on the chin despite the temporary boost in consumer spending associated with the rebate checks.
“They are not luxury retailers, who benefit no matter what happens in the economy, and they are not discounters, which are obviously taking full advantage” of the influx of rebate checks,” he said. “The bottom line is that middle-tier, non-luxury, non-discounters are probably smarting the most.”
Some economists said the outlook for the economy and employment picture is clouded despite the interjection of cash from the government.
“Retail sales and personal consumption expenditures were stronger in May, as personal income got a bump from tax-rebate stimulus checks, but this one-time jolt did not mask very weak sales of consumer durables such as appliances and automobiles,” said Peter Morici, professor of the Robert H. Smith School of Business at the University of Maryland. “Along with weakness in housing and nonresidential construction, credit shortages and tepid automobile sales are causing businesses to trim investments in new capacity and hiring plans. The crisis is clearly worsening.”
For complete coverage, see Monday’s WWD.