WASHINGTON — Apparel specialty stores and department stores are going their own ways — at least when it comes to employment.
The long-term divergence in hiring patterns between apparel specialty stores and general merchandise stores, which have consistently added to payrolls, and department stores, which have been shedding jobs, stems from a multitude of factors, ranging from a decline in consumer purchasing power to consolidation and a shift in retail market share.
Continuing a pattern of steady job growth, clothing and accessories stores added 1,800 jobs to employ 1.42 million in June compared with May, according to the Labor Department’s report on Friday. General merchandise stores, a category that includes discounters and department stores, boosted payrolls by 4,200 to 2.98 million.
But department stores took the biggest hit, despite healthy comparable-store sales gains in June, cutting 1,500 jobs to employ 1.48 million last month.
Economists and analysts said part of the disparate retail employment trend was cyclical, citing a steeper employment loss for apparel and accessories stores than department stores and discounters during the heart of the recession in 2009, which caused the sector to have to make up more ground once a recovery began.
Specialty store employment fell 9 percent from a peak in November 2007 of 1.52 million to a low of 1.35 million in October 2009, while department store employment dropped 8.9 percent from its peak of 1.61 million in December 2007 to a low of 1.46 million in December 2009, according to analysis by Scott Hoyt, senior director of consumer economics at Moody’s Analytics, and John Lonski, chief economist at Moody’s Capital Markets Group.
Discounters, meanwhile, were able to better maintain employment levels. Payrolls were cut back 2.4 percent from a peak of 3.1 million in January 2008 to a low of 2.93 million in December 2009.
“It helps explain why the recent gains in employment at clothing and accessories stores appears so steep, relative to other categories,” Lonski said. “In part, sales at those stores are now actually doing fairly well and the other reason is they cut back so severely on employment during the recession.”
In addition, department stores have gone through a prolonged period of consolidation and lost a significant share in overall retail sales in the past decade, while specialty stores have maintained their sales share and discounters have made the largest gains, Lonski said.
In May, department stores had a 21 percent share of retail sales in the three categories, while discounters controlled a 53 percent share and apparel and accessories stores had a 26 percent share, Lonski said. But in May 2001, department stores had a 38 percent share, discounters held a 34 percent share and apparel and accessories stores had a 28 percent share.
“There has been a lot of consolidation in the department store sector and discounters now have a bigger share of the market because they have the economies of scale and can offer merchandise at lower cost,” Lonski said. “Customers are looking for value added and they go to discounters to find it. When Wal-Mart begins selling higher quality merchandise, watch out.”
Andrew Fitzpatrick, director of investments at Hinsdale Associates, said department stores such as Macy’s Inc. have done a good job at “looking at head count and making necessary changes.
“They’ve trimmed a lot of fat by doing that,” Fitzpatrick said. “We’re seeing the jobs market really struggle with gaining any momentum and that is consistent with the fact that a company like Macy’s is being very careful in its hiring.”
Fitzpatrick said department stores have developed a business model similar to that of the airlines — “they are focusing on price and trying to lure customers with low prices and not necessarily high service.
“They are taking service out of the equation and sticking primarily to price motivation,” Fitzpatrick said of department stores.
Retailers across the board are faced with a growing number of external factors, such as high gas prices and commodity costs, that are affecting their hiring decisions, he added.
“It forces hiring managers to go slow on that because of the uncertainty and volatility in the economy and knowing that the consumers are really challenged right now in terms of their spending habits,” Fitzpatrick said. “It just really forces these managers to probably lean toward the ‘being safe rather than sorry’ mentality and keeping hiring to a minimum.”