Retail Sales Grow for Quarter, Employment Concerns Linger
March marked the ninth consecutive month of retail sales gains, but analysts say rising gas prices could dampen shoppers’ spirits even as the job-market picture brightens.
Retail sales—excluding gas stations, automobiles, restaurants and bars—rose 0.6 percent in March over the previous month and 3.9 percent from March 2010, according to figures released April 13 by the U.S. Department of Commerce. Total sales for the first quarter of 2011 were up 8.1 percent from the same period in 2010.
Dr. Nancy Sidhu attributes the sales increases for the quarter to a strengthening job market.
“My question is, ’What is the environment for apparel consumers?’” said Sidhu, vice president and chief economist of the Kyser Center for Economic Research at the Los Angeles County Economic DevelopmentCorp. “Is employment growing or shrinking? It’s growing. Employment is growing, and salaries and spending power are inevitably growing as well—even with adjustments [for inflation]. Spending power is increasing. We’re up off the bottom.”
Jack Kleinhenz, chief economist of the National Retail Federation, attributed March’s spending gains to “improving financial situations, including the temporary payroll tax cut, wage gains and a strengthening labor market.”
The March sales increase, however, represents a loss of momentum from the first two months in the quarter, when retail sales grew 1 percent and 1.1 percent, respectively, each month.
Department stores reported a 3.2 percent drop in sales for the quarter as compared with the same quarter in 2010. Apparel and accessories clothing stores fared better, reporting sales of nearly $48.5 million during the first three months of 2011—an increase of 4.1 percent over the same period last year. For the first two months of the quarter, apparel and accessories sales were up 3.6 percent, Sidhu said.
“Shoppers last month were eager to take advantage of retailers’ spring promotions on everything from apparel to outdoor furniture,” said Matthew Shay, president and chief executive of the NRF, in a statement. “While current indicators point to a more confident consumer, increasing gas prices and a cramped job market could hamper consumer spending during the upcoming summer months, a key time of year for retailers.”
Sidhu agreed. “The big picture is that income is growing and retail sales are rising hellip; but a rather large increase in gas prices will drain purchasing power. This is true especially for the low- and middle-income worker,” she said.
Jerry Nickelsburg, senior economist at the UCLA Anderson Forecast, said the “gradually improving” labor market is key to California’s fiscal health.
“Consumers are beginning to return to retail,” he said, adding that savings rates are still higher [than pre-recession levels] even as people begin to spend more. “More spending results in an increased demand for manufacturing.”
The apparel industry saw month-over-month and year-over-year employment increases in February. According to an industry employment report from the Employment Development Department, cut-andsew manufacturers in the state hired 4.7 percent more employees in February 2011 than during the same month last year and 1.5 percent more than during January 2011.
According to the UCLA Anderson Forecast’s first quarterly report, it is “cautiously sanguine regarding the national economy, as real gross domestic product continues to grow at a steady pace and employment continues to increase.” The California forecast is slightly weaker, the report said, because the predicted unemployment rate will be “substantially” higher than the national rate at the end of 2013.
The report, titled “On the Mend” and co-authored by Nickelsburg, said it expects California to grow its employment by 1.1 percent in 2011, with the bulk of the growth coming in the latter part of the year.
“Employment growth is expected to speed up in 2012 and 2013 as the recovery takes hold. Real personalincome growth is forecast to be 1.3 percent in 2011 and 3.7 percent and 4.1 percent in 2012 and 2013, respectively,” the report concludes. “We do not expect [unemployment] to reach 9.7 percent [from its current 12 percent to 13 percent] until the first quarter of 2013, and we expect the unemployment rate to remain elevated at 8.9 percent through 2013.”
