Retail Employment Slumps Most in Year as Stores Cut Back

Employment by retailers slumped the most in more than a year last month, hurting growth in the U.S. job market, as higher payroll taxes and concern fiscal policies will reduce consumer spending prompt companies to trim costs.

Retail employment declined by 24,000 in March, the most since February 2012, Labor Department data showed today in Washington. That included a drop of 15,000 in clothing and accessories stores and a decrease of 10,000 in building-material and garden suppliers, according to the report.

Wal-Mart Stores Inc., Sears Holdings Corp. and J.C. Penney Co. have reduced their workforces to cut costs and keep prices low at the same time that they work to fend off competition from online merchants such as Inc. Retailers have been cautious about hiring because of political paralysis in Washington and concern the 2 percentage-point increase in payroll taxes will slow purchases, said Jack Kleinhenz, chief economist for the National Retail Federation.

“Retailers are very concerned about getting the right mix of inventory and employees, and how to make that mix work,” Kleinhenz said in a telephone interview today.

The NRF, a Washington-based trade group, forecasts U.S. retail sales will increase 3.4 percent this year, slower than the 4.2 percent gain in 2012.

Overall, U.S. employers hired fewer workers than forecast in March and a slump in the size of the labor force pushed the jobless rate down to a four-year low. Payrolls grew by 88,000 workers, the smallest gain in nine months. The jobless rate fell to 7.6 percent from 7.7 percent.

Wal-Mart Complaints

The decline in retail employment last month represents a pause in a pickup that began in July of last year. In the eight months that ended in February, retail employment increased by about 205,000.

Wal-Mart, the world’s largest retailer, has been working to bolster profitability by opening more stores while hiring fewer workers. The U.S. workforce at Wal-Mart’s namesake and Sam’s Club warehouse chains fell by about 120,000 employees in the past five years, to about 1.3 million, while the company has added about 484 U.S. stores.

The workforce decline has coincided with customer frustration that there aren’t enough employees to keep shelves stocked, cash registers manned and shoppers’ questions answered.

The Bentonville, Arkansas-based chain’s workers have complained that merchandise ready for the sales floor remains on pallets and in steel bins in stores’ back rooms because there aren’t enough employees to stock shelves. At Wal-Mart stores across the country, departments have merged to eliminate positions. Management bonuses at the chain are based partly on minimizing store payroll.

Customer Satisfaction

Wal-Mart’s in-stock shelf availability is at historically high levels, averaging about 90 percent to 95 percent, and surveys of more than 500,000 customers a month show its shoppers have positive experiences at the stores, Brooke Buchanan, a spokeswoman, said today.

The company hired about 80,000 workers in the U.S. from Feb. 1 through April 1, Buchanan said today, without providing the net change to the retailer’s workforce. Wal-Mart typically has 15,000 to 50,000 job openings and is currently at the high end of the range, Buchanan said.

“We’re committed to doing more to help Americans get back to work,” she said.

Sears Shrinks

After closing stores and spinning off its smaller-format locations, Hoffman Estates, Illinois-based Sears had 18,000 fewer workers in the year ended Feb. 2, for a total of 246,000, according to company filings. J.C. Penney has eliminated 19,000 jobs since Chief Executive Officer Ron Johnson began an overhaul of the company’s pricing and merchandise last year. Sales at the Plano, Texas-based merchant plunged 25 percent in the year ended Feb. 2, and the company employed about 116,000 workers as of the end of that fiscal year.

Retailers in the U.S. operate more than 3.6 million businesses, contributing $2.5 trillion to annual gross domestic product, according to the NRF.

The Standard & Poor’s 500 Retailing Index fell 0.7 percent today, while the broader S&P 500 slid 0.4 percent.

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