Could Retail Job Growth Actually Save Companies Money?

The news from the Bureau of Labor Statistics (BLS) last week that the retail industry added 48,000 new jobs in March — bringing the increase to 378,000 new jobs over the past 12 months — appears to be positive on a number of fronts.

First and foremost, it’s certainly a welcome development for any of those 48,000 workers who may have previously been unemployed.

Accordingly, a rise in employment is likewise beneficial for the U.S. economy overall, as it puts more money into circulation.

Finally, that addition of a significant number of jobs — especially taking into account the year-long upward trend — bodes well for the retail industry nationwide. A retail company cannot grow without labor (at least, not until the robots take over), and an increase in its workforce sets the stage for the business’ expansion.

While it’s reasonable to presume that any U.S. corporation among those currently building out their ranks of retail employees may be allocating a greater amount of funds to wages in the short term towards the goal of increased profits in the long term, that might not necessarily be the case. Some of those companies, if they are of a certain size and/or in certain specific verticals (automotive giants GM and Ford, for example), could — taking into account a wider view of the latest trends in employment in the United States — actually be saving money already.

For larger, self-contained businesses in the retail space, like those aforementioned, retail workers are only one-half of the labor equation. Discounting, for the sake of argument (and lack of a better term), “white-collar” positions, such as those in the executive and IT ranks, the other half is the behind-the-scenes area of manufacturing.

And while the number of retail jobs in the U.S. continues to rise, the adverse trend is occurring with respect to manufacturing jobs — which, last month, declined by 29,000. According to seasonally adjusted data from BLS, in fact, employment numbers in the two sectors have been on their current divergent courses since 2002, when retail first overtook manufacturing.

As addressed in a story yesterday (April 5) by The Atlantic, those manufacturing positions tend to be occupied by workers of specific training backgrounds and skill sets, who, as a result, command higher wages than the often untrained employees in retail positions — a significant swath of whom work for minimum wage.

It stands to reason, therefore, that large corporations, whose purview includes both the product creation arm (AKA manufacturing) and product sales arm of their retail operations, are able, in the current economic climate of an influx of retail jobs, to not only sustain the financial impact of taking on more low- and minimum-wage employees but actually offset it by getting rid of manufacturing employees that cost them notably more money to begin with, thus resulting in an immediate financial benefit for themselves — never mind the aforementioned long-term one that can be born out over time from an increase in retail workers.

Noting, in an op-ed piece for Investor’s Business Daily, that the bulk of the new jobs in the U.S. are specifically in part-time retail, financial analyst Kenny Polcari (using arguably an aggressive amount of all-capitalized words and a lot of nonstandard abbreviations — he might have texted the whole thing to the outlet — but nonetheless basing his argument on BLS data) posits that the substantial difference between the pay level of those positions and the disappearing ones in manufacturing is bad news for the country’s workforce, as it is likely to only further the prevalence of wage stagnation.

Such an argument does compel the revisiting of the three potential beneficiaries reflected in the latest employment statistics that we laid out at the start.

Retail employees. Any job is better than no job; so, in the case of someone that went from unemployed to employed between February and March, the benefit stands. However, for retail employees that made a lateral move from one minimum-wage, part-time job to another, the fact that that new job didn’t previously exist has no net positive impact.

The U.S. economy. The fact that a number of industries (including those with higher employee pay rates than retail, such as manufacturing) experienced job losses, while retail saw gains therein, plus the continuance of stagnant wages, about which Polcari shout-typed, makes the likelihood of a resultant overall economic boost seem far less than a sure thing.

The retail industry. In reassessing this potential beneficiary of the increase in retail employment, we’ll turn things over to Stephen Stanley, chief economist at Amherst Pierpont Securities, who succinctly explained to The Wall Street Journal:

“Any company facing the consumer is probably feeling pretty good about things right now.”

No doubt, it is, Mr. Stanley. Especially if it also controls its manufacturing division.