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Recession stole Christmas jobs, sales
Question of the Day
December, already one of the worst months in history for retailers, is shaping up to be just as bad for jobs.
Even mighty Wal-Mart was humbled by the most dismal Christmas season in decades, announcing disappointing sales and earnings Thursday. Steep discounts offered from coast to coast failed to rouse shoppers from a slumber that only deepened at the end of the year and made 2008 the slowest year for retailers since at least 1970.
Macy’s, the nation’s premier department store chain, said sales were down 4.7 percent from a year ago and ordered another 11 store closings, resulting in the loss of 960 jobs. Sears reported a 7.3 percent sales drop, while Nordstrom and J.C. Penney surprised analysts with declines of “only” 8 percent and 7 percent, respectively. Sales at clothing retailers like Gap and Abercrombie & Fitch plunged by double digits, while luxury retailers Saks and Neiman Marcus saw sales plummet by 19 percent and 26 percent, respectively.
“This has been the most challenging economic environment in memory,” said Macy’s Chairman Terry Lundgren.
“It’s going to be ugly. Clearly it’s tough for the strong, well-capitalized retailers, so you can imagine what’s going on for the weaker players,” Adrianne Shapira, a Goldman Sachs retail analyst, told CNBC.
Analysts have been predicting a rash of store closings and bankruptcies among retailers, which are among the top employers in the United States. Their woes led to the loss of 115,000 jobs in the year through November, and the deep losses during the critical holiday selling season are now adding to worries that the job market was dealt a stunning blow in December. That normally is one of the biggest months for retail jobs as stores take on temporary employees to get through the holiday sales crush.
Evidence of a bloodletting in the job market prompted many Wall Street analysts and investors to predict a loss of as many as 700,000 jobs in an employment report due out Friday, outstripping November’s loss of 533,000 jobs in what would be the worst performance in decades.
“Brace yourself for some awful jobs numbers,” said Bernand Baumohl, an analyst at the Economic Outlook Group, who is expecting the economy to shed 750,000 jobs. “Every economic indicator with ties to the job market is flashing a warning about December.”
Wall Street markets were shaken Wednesday when ADP, a top payroll processor, reported a shocking loss of 693,000 private-sector jobs during the month. TrimTabs, a firm that tracks daily income tax withholding by the U.S. Treasury, projects a similar-sized job loss.
Further warning signs came from Chicago firm Challenger, Gray & Christmas, which reported 166,348 layoff notices last month - the largest December job cut total ever. Institute for Supply Management indexes that track employment among manufacturers and service industries shrank during the month.
The National Federation of Independent Business reported a record drop in employment in a survey of small businesses it has conducted since 1974.
The huge job losses that many are anticipating threaten to set off a “vicious downward cycle” in the economy that will “alarm investors and terrify households,” Mr. Baumohl said. “As the number of people without jobs accelerates, so will the retrenchment in household spending. Of course, if consumers cut back more, business sales and earnings shrink further. The collapse in profit margins will force companies to carry out yet another round of layoffs,” completing the vicious circle, he said.
Markets were somewhat relieved Thursday when the Labor Department reported a 24,000 drop in first-time jobless claims to 467,000 in the week ended Dec. 27 — seemingly the first good employment news for the month — though the total number of people receiving benefits rose to a 26-year high of 4.6 million.
That “softened the blow” for investors worried about the sinking job market, but global markets from stocks to commodities and currencies remain wary and sensitive to any news about jobs, said Mark Frey, vice president at Custom House, a Canadian investment firm.
“Global employment has overtaken widespread banking system failure as the No. 1 risk to the global economy,” he said.
About the Author
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