Even though the number of retail job losses is not causing havoc in the labour market today, “the pace of adjustment away from brick and mortar towards online and likely to impact the overall data in time” according to a new research report on the topic of retail job losses from Bank of America.
Brick and mortar retail losses have accelerated in recent months hitting a staggering 61,000 over February and March. Initially, this weakness was blamed on a slowdown in consumer activity on weak demand for seasonal goods. However, a deeper dive into the data suggests there is more to the story “than just the recent weather patterns with evidence of more persistent weakness” according to BOA.
Brick and mortar – Retail Job Losses Are Snowballing Into A Problem
According to proprietary BOA credit and debit card data, there is a considerable weakness in card spending in department stores show through. The analysts speculate that this weakness is an example of “increased competition from online retailers who have gained significant market share.”
Given the accelerating disruption in the retail sector, BOA believes retail is heading for a structural change, likely to disrupt the retail workforce. And if this scenario does pan out, it’s worth considering where displaced retail workers will eventually end up. CPS microdata from the Bureau of Labor Statistics presents an interesting picture of former retail worker movements:
“Using a match sample across adjacent months, we can see which industries unemployed retail workers find jobs. So far most displaced retail workers are finding another job in the retail industry. In 2016, approximately 42% of unemployed retail workers ultimately found another retail position. But others are moving into other service sectors such as leisure and hospitality, professional and business services, and education and health. In particular, majority of retail workers that find jobs in the leisure and hospitality sector find jobs in the food services and drinking places industry. This isn’t all too surprising given that skills that are useful in the retail sector overlap with skills needed in other service industries.”
But as bricks and mortar closures snowball, displaced workers may find it more difficult to obtain another similar retail position, this suggests “displaced retail workers will likely transition to other service industries mentioned above but also find work in less traditional industries.” One such example is courier and delivery services, as well as online fulfilment centres, which have seen a boom in employment thanks to rising online sales. The CPS data bears this out as share of retail workers that found jobs in this sector has risen from 1.8% in 1996 to 4.2% in 2016.
For the time being this structural retail change is unlikely to impact employment figures significantly thanks to a tight labour market and booming service industry. But BOA’s analysts believe it’s only a matter of time before the adjustment starts showing up:
“We think the pace of adjustment away from brick and mortar toward online is meaningful and is likely to impact the overall data in time.”