Today’s guest blog post is courtesy of Dr. Robert Yerex, Chief Economist at Kronos. You can find more information on the Kronos Retail Labor Index and details about the most recent results here. You can listen to a podcast conversation with Robert on “the new normal” here.
The New Normal, with High Unemployment
The past year saw a general stabilization in a number of important aspects of the consumer retail market. Many of the changes wrought during and immediately after the recession are likely to be permanent, at least until the next significant change.
This figure gives us a glimpse of this emerging new normal. Retail sales, represented by the width of the line, have steadily though slowly increased since the “bottom” of the recession in mid-2009, as has industrial production of consumer goods. What has not returned are the jobs. The color scale clearly shows that the unemployment rate remains stubbornly high.
During 2010, the most important changes in the retail / consumer economy included:
- Reduced Labor Capacity: Retailers have reduced their overall labor capacity by 9.7%.
- Increased Efficiency: While retailers were reducing their labor forces, retail sales have recovered to prerecession levels. This combination results in retailers using 13.3% less labor per dollar of sales when comparing Q4 2010 to Q4 2006.
- Compressed Holiday Hiring: During 2010, retailers continued to shorten the lead time for holiday season hiring, with the peak not occurring until Nov. 18.
- Shrinking Workforce: The percentage of the U.S. population actively participating in the labor market is at a 20-year low. This change has masked the unemployment rate, which counts only the percentage of participants who are out of work.
- Uncertainty Reigned: Economic and political uncertainty ruled the day during the last half of 2010. Issues critical to retail employment that were undecided until late in the year included the fate of long-term unemployment benefits and renewal of the Bush-era tax cuts.
- Reduced Borrowing: Consumers held less revolving debt in November 2010 than they did in August 2006. There remains considerable debate as to how much of this debt reduction is voluntary and how much is due to lenders writing off bad debt.
- Lagging Housing Market: The housing market remained depressed through most of 2010, with the percentage of homeowners facing foreclosure continuing to rise. Many real estate market experts predict that the peak of foreclosures will occur sometime in 2011 at a rate 20% higher than currently being recorded.