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government-trade

Big Stores Cut Payrolls in June

Apparel specialty stores register small increase in government’s jobs report.

WASHINGTON — Discounters and department stores slashed jobs in June, while apparel and accessories stores posted a slight uptick in employment as job growth in the overall economy continued at a weak pace, the Labor Department said Friday.

Department stores cut a seasonally adjusted 12,900 from payrolls last month to employ 1.52 million, while general merchandise stores, a category that includes department stores, reduced payrolls by 11,500 to employ 3.06 million. Employment at apparel and accessories stores rose 1,000 to 1.37 million in June.

In the overall economy, employment rose 80,000 last month, again falling below economists’ expectations, and the unemployment rate remained unchanged at 8.2 percent.

“It seems like [department store employment] is following suit with the drop in sales we’ve seen in the last month or two,” said Andrew Fitzpatrick, director of investments at Hinsdale Associates. “Right now, they are still very cautious in their hiring.”

Fitzpatrick put more emphasis on the slowdown in the U.S. economy as the primary factor behind weak hiring than he did on economic uncertainty overseas.

“I don’t think the crisis in the euro zone is as much a factor on retailers because they are a little more insulated here,” he said. “I think it is more of a factor of the overall trend of the slow-growth economy that we are in. I think we are seeing a broad-based slowdown in jobs creation and another factor is that people are still deleveraging and they are generally more tight with their budgets and saving more.”

Fitzpatrick said apparel specialty stores have “held up pretty well” in the sluggish economy.

“They have done a great job with inventory levels and they have been able to maintain margins through all of the pricing pressures by keeping costs down and managing very tightly, which has resulted in better profits and steady employment,” Fitzpatrick said.

Scott Hoyt, director of consumer economics at Moody’s Analytics, attributed the big drop in department store employment to weather-related factors.

“The working assumption is basically that not only because of warm weather but because there weren’t a lot storms this winter, consumers were out shopping more than they otherwise would have been, which benefited many retail segments. Retailers responded to that with more hiring in December, and in January and February, they did not let seasonal workers go as quickly. Once the weather normalized they starting getting payback for that.”

Fitzpatrick and Hoyt both pointed to increases in incomes in the June report, which they said is an encouraging sign to employers moving forward.

“We saw some signs of wage growth in June and that is a sign that employees have a little bit of leverage here,” Fitzpatrick said. “I think we will see an uptick in sales come July and August for back-to-school. I think [the weakness in] hiring is experiencing a bump in the road here and I don’t see that trend continuing.”

As for employment in the overall economy, Nigel Gault, chief U.S. economist at IHS Global Insight, said the lackluster June jobs report does not indicate the economy is heading into a recession.

“If the economy were tipping into recession, you would not expect to see the workweek edging higher, temporary jobs rising slightly faster, and hourly earnings rising more quickly — all of which happened in June,” Gault said. “But firms are being very careful about adding new full-time employees. Uncertainties over the strength of global growth, the euro zone crisis, the fiscal cliff and the November elections are giving plenty of reasons for caution.”

In the manufacturing sector, apparel manufacturers trimmed 2,300 jobs from payrolls to employ 147,300, while mills making apparel fabrics and yarns cut 100 to employ 119,100. Employment at mills making home-furnishings products fell 100 to 114,000.