Photographer: Simon Dawson/Bloomberg
Productivity

Fewer Workers Selling Stuff, More Workers Doing Stuff

The U.S. has shed jobs in the retail sector, which is not as bad as it sounds. Those people become more productive in other jobs.

The retail sector in the U.S. has shed jobs month after month. That's not bad news.

The U.S. economy is shifting workers from jobs with low productivity -- like retail -- to jobs with high productivity -- like making things and providing services. That could be part of the answer for how the economy can get back to growing as rapidly as it once did. 

"Productivity growth" is not just about workers working harder, or companies investing in equipment that helps workers to accomplish more faster. It's also beneficial when workers quit low-paid, low-productivity jobs in order to take higher-paying, higher-productivity positions. So what if the retail sector is shedding jobs? That's not leading to higher unemployment. People are finding jobs in other sectors, contributing more to the growth of the economy.

In fact, the two lowest-paid industries, retail and the leisure and hospitality sectors, are shrinking (as a share of total employment). Retail jobs pay on average a little over $15 an hour, and leisure and hospitality pay a little over $13 an hour.

Shifting Sectors

Year-over-year change in share of employment for retail/leisure & hospitality employees

Source: U.S. Bureau of Labor Statistics

What's been replacing retail and leisure jobs? Higher-paying jobs in two of the more productive sectors: goods-producing and professional/business services. Goods-producing jobs like those in manufacturing and the energy sector pay around $23 an hour, and professional and business services jobs average $26 an hour. Their share of total employment fell somewhat during the oil sector's troubles but is now rebounding and continuing to grow again.

The More Productive Jobs

Year-over-year change in share of employment for goods-producing/professional & business services employees

Source: U.S. Bureau of Labor Statistics

This kind of industry migration on the part of workers should help support both wage growth and productivity growth. That will be increasingly important as the U.S. approaches full employment. In the past 45 years the U.S. has been below 4 percent unemployment only once, for a handful of months in 2000. With the overall unemployment rate at 4.5 percent now, it soon won't be possible to increase output by hiring more workers. But if millions of the 31 million people working in the retail and hospitality sectors were to switch to better-paying, more-productive jobs in other industries, that could lead to higher wages and faster economic growth without any net new job growth.

The upsides will outweigh the downsides, but there is a trade-off as retail employment shrinks. We've heard so many pining for lost manufacturing jobs, but perhaps in a more productive economy at full employment, our nostalgia will be for the fruits of bountiful cheap service labor -- well-crafted cocktails made by young people with graduate degrees, and a taco truck on every corner.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Conor Sen at csen9@bloomberg.net

    To contact the editor responsible for this story:
    Philip Gray at philipgray@bloomberg.net

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