Want to know how the U.S. economy is faring? Jobs data from the Bureau of Labor Statistics could provide the key.
On Thursday, the Labor Department reported that new jobless claims totaled 712,000 for the week ended Nov. 28. That’s lower than the 787,000 claims, on a revised basis, for first-time unemployment benefits the week before and better than the 780,000-range that some economists had estimated. But there’s a caveat. While the figures suggest an improvement, analysts may have had difficulty adjusting for last week’s Thanksgiving holiday. If that’s true, next week’s report for the week ended Dec. 3 could spike.
So far, the employment picture has improved somewhat from the depths of the coronavirus pandemic in late March. That’s when first-time unemployment claims hit a peak of 6.9 million. Since then, nonessential retailers that temporarily closed due to local and state government mandates to help curb the virus have reopened most of their doors. And restaurants and bars have called back furloughed workers as they adapted to outdoor dining.
But Friday’s monthly report for November showed that the economy added just 245,000 jobs in November. That’s the slowest month of growth since the spring, and significantly far below the gain of 440,000 jobs that many economists had projected for the month. And it’s not a good sign when there are still more than 9 million Americans who remain unemployed. Retail jobs for the month were down 35,000.
Retail jobs traditionally fare worse in the months ahead. Women’s fashion chain Francesca’s last month said it planned to close 140 doors, and on Thursday it filed a Chapter 11 bankruptcy petition in Delaware. The women’s value chain likely will be joined by others that will be forced to file after finding that holiday receipts won’t be what they expected. But even if a retailer can get by without a bankruptcy filing, there’s a good chance it might need to close some unprofitable stores and those closures obviously will displace store associates.
Moreover, extra workers were hired to help fill the expected increase in volume of online orders to meet holiday demand, but many of those jobs are seasonal and tend to go away come January. Another wave of Covid infections surging across the country could see those workers stay on a bit longer as consumers resort to online shopping as they refrain from entering physical stores. But another Covid surge also could see more pockets of localized restrictions that could spark new temporary closures, and with it another round of furloughed workers.
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Even with the expectation of Covid vaccine options, significant distribution won’t occur until the late spring of 2021. And companies in the fashion and retail sectors will need time to figure out what the new normal will look like. How will comfort play a role in wear-to-work attire when consumers head back to the office? Will employers elect to let workers choose to continue to work from home? They might see cost savings in not needing as much office space as before, but apparel needs would remain as they are, which would hurt fashion brands hoping to see a return to more tailored work options. And will a stronger adoption of connective technologies in the workplace translate to fewer jobs overall?
Credit ratings agency Moody’s Investors Service on Friday, in a report on 2021 outlook for the U.S. retail and apparel industry, said the U.S. still has too many stores. “Where previously these retailers could live with marginally profitable stores, the abrupt mass shift in U.S. shopping habits will cause many more stores with limited economic value to close,” it said.
While 2020 was considered an “extremely punishing year that saw defaults and bankruptcy filings,” senior credit officer Mickey Chadha said an improvement in business conditions could see operating profit growth of 20 percent for retail and profit growth of 70 percent for apparel manufacturers.
Fashion and retail firms pulled back significantly on their product lines and consequently have seen better margins as there’s less inventory to mark down. Despite a few pluses, Chadha, the lead analyst for the report, concluded: “With the economic recovery still tenuous and unemployment remaining high, we would like to see a more sustained path to normalization in the next couple of quarters before we change our outlook to positive.”