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Job Climate Remains Difficult

Discounters and specialty retailers, anticipating a boost in consumer spending from one-time tax rebate checks, added jobs in June, but department stores...

WASHINGTON — Discounters and specialty retailers, anticipating a boost in consumer spending from one-time tax rebate checks, added jobs in June, but department stores and apparel and textile manufacturers reflected a national trend and cut back.

This story first appeared in the July 7, 2008 issue of WWD.  Subscribe Today.

The Labor Department reported that general merchandise stores, a category that includes discounters like Wal-Mart, bucked the flow toward weakening employment, posting a gain of 8,900 jobs in June to employ 2.9 million, while apparel and accessories stores added 900 jobs to payrolls, bringing the total number of positions to 1.5 million.

Meanwhile, department stores trimmed 600 jobs to employ 1.5 million, reflecting a pattern of consolidation and aggressive competition from mass merchants.

The manufacturing sector, locked in a downturn that has spanned decades, shed jobs in June. Apparel manufacturers trimmed 1,300 jobs last month to employ 195,200 workers. Domestic textile producers cut 4,900 positions, driven largely by losses at textile mills that make apparel fabric, which trimmed 3,200 jobs to employ 151,900. Textile product mills, which primarily produce home furnishing textiles, cut 1,700 jobs to 149,900 positions.

The job reductions reflect shrinking payrolls in the overall U.S. economy. Employers cut 62,000 jobs in June, the sixth straight month of job losses in a troubled climate marked by rising food and gas prices, a declining stock market and falling home prices that have squeezed consumers. The unemployment rate held at 5.5 percent after spiking half a percentage point in May.

“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.”

Although the impact of the tax rebate checks provided by the government to jolt a faltering economy is uncertain, 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.

“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 rebate checks, he said. “The bottom line is that middle-tier, nonluxury, nondiscounters are probably smarting the most.”

In May, “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.”