Retail Sector Hit Hard by Job Cuts

[January 05, 2008]  WASHINGTON (AP) -- Employees at car dealerships, furniture stores, gas stations and clothing retailers were among the hardest hit by job losses in December, when unemployment climbed to a two-year high.

Workers at department stores bucked the trend that led to the nationwide loss of more than 24,000 total retail jobs last month, but even those companies' stocks - along with the rest of the retail sector - took a beating on Friday after the Labor Department said the unemployment rate had jumped to 5 percent.

"In an overall weak economic environment, employment will be very slow growing and I expect more of the same going forward," said National Retail Federation Chief Economist Rosalind Wells.

Consumer spending has been hurt by the housing slump, credit problems and high food and gas prices, analysts said.

General merchandise and department stores likely added workers as they prepared "for a lot of (consumers) trading down" from apparel and other specialty retailers that struggled through much of 2007, Wells said.

On Wall Street, Macy's Inc., J.C. Penny Co., Kohl's Inc., Bon-Ton Stores Inc. and Stage Stores Inc. all hit 52-week lows during Friday trading. The major indexes also fell, with the Dow Jones industrial average losing more than 200 points Friday afternoon.

"The (department store) stocks are getting hit because employment is one of the strongest drivers of future retail spending," said Patricia Edwards, a retail analyst in Seattle for Wentworth, Hauser and Violich. "If you don't have a job, you don't spend as much money."

If stores already had bought their merchandise, they could trim margins through lower prices, but slumping sales also meant they needed "less people to man check-out counters and fold sweaters," she said.

Buckingham Research Group analyst David J. Glick cut his ratings to "Neutral" from "Buy" on Kohl's, J.C. Penney, Stage Stores and Bon-Ton "based on mounting macroeconomic challenges, expected disappointing December (same)-store sales, and what we anticipate will be compressed fourth-quarter margins."

Besides retail, the construction, financial services and manufacturing sectors also shed jobs in December. The government added 31,000 jobs last month, while private employers cut payrolls by 13,000.

Wall Street economists surveyed by Thomson/IFR expected the unemployment rate would rise to 5 percent, but payrolls were expected to grow by 70,000 instead of only 18,000.

[Associated Press; By DAN CATERINICCHIA]

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