Sears, Best Buy: Retail and Our Nebulous Job Market
With the news of Sears Holdings Corp. (NASDAQ: SHLD) and Best Buy's (NYSE: BBY) closing a number of stores, it is as if we are witnessing the twilight of retail. The decline of the retail world is probably related to the rise in Internet commerce and tightening wallets, but how does retail's decline play into our nebulous job market? I've previously suggested that a retail implosion could be on the horizon, but if we continue along this line of thought in light of the labor market and changing consumer behavior, our situation may portend much direr circumstances.
MarketWatch's Rex Nutting had an interesting article from April 13, 2012 addressing whether baby boomers are in fact taking all the jobs. Nutting: "The US economy is finally creating jobs again, but most of them seem to be going to aging baby boomers, not to young adults just starting out on their careers. But as we shall see, appearances can be deceiving."
While employment for older Americans (55 and over) grew by 2.9 million and employment for young adults (25 and under) grew by 815,000, "teenage employment actually declined." That being said, more baby boomers are staying in their jobs owing to economic struggles, better health, and the desire for self-fulfillment. Where older Americans could be looking forward to retirement, Nutting wrote that "they lost their retirement nest egg when the housing market collapsed and the stock market stalled." Even further, "fewer of them can rely on a defined benefit pension, and more of them must rely on their own savings to fund their retirement."
Nutting argued that "baby boomers are taking a disproportionate share of the jobs, but it's not nearly as dramatic as the raw numbers portray." According to Nutting, "we can't really know how many people have gotten a job since 2009." Even further, owing to how the Bureau of Labor Statistics "updated its data to synchronize them with the latest population figures from the 2010 Census, we can't directly compare January 2012 levels with December 2011 levels." Thus, Nutting suggested that the number from the BLS of people not in the labor force "wasn't meaningful" owing to "how the BLS works."
Nutting also discussed that it's also important to keep in mind that "our population is aging". With this in mind, "the good news is that employment has been growing faster than the population in every major demographic group... But, except for the oldest age group, the employment-population ratio is far below pre-recession levels." Nutting: "Many young people aren't getting the opportunities they need to find a place in this world and to begin building their lives." In the end, Nutting wrote that the same thing happened to those young adults in the 1930s: "They put their lives on hold for years, and we are still living with their legacy: the baby boomers who are now clinging to their jobs."
Nutting's analysis would appear to illustrate a problem with respect to gauging the American job market: It is substantially nebulous; it looks different when you view it differently. It is as if in light of the fact that some financial and political commentators no longer take the government's employment statistics seriously, we are left to view the quagmire from anecdotal perspectives. A recent article from Zero Hedge's CrownThomas went so far as to wonder if our unemployment chart is upside down. From the article: "So, [between the unemployment rate and labor force participation] what are you focused on? If you're looking strictly at a chart of the 'official' unemployment rate, you should flip it upside down -- that would give you a better idea of how things really are out there."
This phenomenon brings to mind economist Gregory Mankiw's observation that "people give too much weight to a small number of vivid observations." As faith in the unemployment numbers wanes, individuals think more to localized observations -- the employment situations of children, siblings, friends, etc. Even further, economists trying to make sense of problems in the job market may be left to look at theoretical underpinnings of the market actors in the scope of the market structure itself.
Obviously, this perspective is problematic not only in terms of defining problems in the labor market, but also finding solutions to those problems. In terms of a decline in retail, the situation becomes more ominous. Going back to CrownThomas' "how tings really are out there", what we are seeing (or at least, what I am seeing) appears to be stores closing, empty plazas where businesses once were, vacant spaces in malls, and a lackluster job market. This is a situation where not only does the job search process need to be re-examined and changed on societal and cultural levels, but also current socio-cultural norms of job training and education are in need of serious reevaluation.
Going back to the question of retail, SmartMoney's Quentin Fottrell recently discussed how "store sales are up. The job market is improving... [but] retailers aren't hiring." Fottrell: "While store sales appear encouraging partly due to a warm winter and Easter falling two weeks earlier than last year... job growth last month slowed significantly in that sector."
As for why retailers are not hiring, Fottrell discussed that, "Big box and department stores have been employing stricter control of inventories instead of new workers." Investing in processes rather than personnel; ergo, this equates to "fewer retail workers and less square footage". Given rising food and fuel costs, aside from momentum in auto and gasoline sales, "recovery in the rest of the retail sector has been tepid."
Ominously, department stores "appear to be experiencing a choppy recovery". Fottrell continued that "with tentative signs of a jobs recovery underway, others say it's too soon to know if the retail sector will under-perform the overall jobs market throughout 2012." With the ease of Internet shopping websites like Amazon (NASDAQ: AMZN) and in light of squeezed consumers, Fottrell's analysis portends trouble for job growth in retail going forward.
Not only does the question of retail and unemployment cut to the heart of the American labor market, but it also relates to issues regarding American consumerism and culture. At a time when it has become harder for Americans to purchase physical books and music in light of changing cultural norms, one has to wonder how technological development is impacting the labor market and the availability of jobs, particularly for young Americans. Whereas I do not want to travel down the road of the "curse of machinery" as discussed by economist Henry Hazlitt regarding the economic fallacy that technology creates unemployment, I think changes in consumer behavior do raise questions regarding viable job growth and how individuals are supposed to find jobs.
Going back to anecdotal sentiments, I remember a time when young Americans could walk into a store and request a paper employment application. Today, in some cases a prospective applicant is told that no such paper application exists and that one would have to apply online. After a lengthy and tedious application process online, an applicant may be told that the company is not accepting applications at this time or that the company is not currently hiring but will keep the application in its records or nothing at all. As an applicant waits weeks to receive a reply from the alienating application procedure, the silence is deafening. Some young Americans may feel like tying their resumes to balloons with the hope that they land on some potential employer's doorstep.
It is as if a young American's resume is sent into a cyberspace void; job applications are sent up to some extradimensional stratosphere -- where they end up, who knows? For young adults, this may be making the great American job search look like an alienating and futile affair. The job search in the marketplace has meaning and definition if at some point one is able to secure gainful employment. Once the job search has become dysfunctional, one has to wonder about the functionality of the job market and job training in general. And obviously, these issues pertain to the contemporary American job search and the job market in general. Nevertheless, problems with this job search scheme become apparent in light of youth unemployment and a drop in retail hiring.
Again, anecdotally, I remember a time when many service sectors jobs were effectively reserved for young adults: fast food, retail, et al. Nowadays, debates regarding cultural changes and work ethic aside, we may be seeing more older Americans working in these jobs once reserved for younger Americans. From another perspective, where younger Americans may have viewed work in retail and fast food as being a you-gotta-pay-your-dues rite of passage prior to a well-paying, fulfilling professional career, they may be finding themselves being relegated back into these sectors after college. With retail faltering, the employment situation for young adults appears to be going from stagnant and uncertain to baleful and hostile.
Given the job market, while younger Americans are already facing an uphill climb owing to a weak economy, the fact that less baby boomers are retiring is ominous. And as the labor market in the US becomes more and more nebulous as the days go by, one has to wonder what our current situation portends in the years to come. As I previously discussed regarding young Americans' use of student loans for living expenses, what else are they supposed to do? Nutting used the analogy of today's young adults being like the young adults in the 1930s. That may sound like a useful comparison, but if we are indeed currently living in the 1930s, heaven help us in terms of to where we are heading.