US Retail Sector Cuts Jobs As Well As Prices To Stay Afloat

Retailers are slashing jobs as aggressively as they are cutting prices, with the latest employment figures showing the industry has given up virtually all of the positions it added since the last recession while the retail unemployment rate has leapt to 8.7%.

Retailers cut 45,000 jobs in January, putting their total employment just below 15 million for the first time in five years, the U.S. Labor Department said Friday.

The current number is just about 100,000 away from where retail employment bottomed, at around 14.9 million, in July 2003, following the recession that began two years earlier.

The January figures are based on Labor Department surveys of paid employees through mid-December. Retailers have further thinned their ranks since then as a battery of big companies, including Macy's Inc. (M), Target Corp. (TGT), Sears Holdings Corp. (SHLD), and Saks Inc. (SKS) have disclosed job cuts.

The retail industry has now lost a seasonally adjusted 592,000 jobs in little over a year, from when the sector's employment peaked in November of 2007.

Retail's 8.7% unemployment rate compares with 5.4% in January 2008. The figure includes some wholesale job cuts by wholesaling companies, but the lion's share is from the retail sector, the Labor Department said.

The latest retail-sector job cuts include 10,000 positions from home-center goods, building-materials and garden-supply stores, 9,000 from department stores and 7,000 from furniture and home-furnishings stores.

While seasonal jobs tend to be cut after the holidays, retailers are going much deeper.

Some 522,000 jobs were added during the seasonal hiring period of October through mid-December, the lowest number in the decade the Labor Department has been tracking holiday employment.

In recent years, 600,000 or 700,000 jobs have been added for the Christmas holidays, and the workers were let go by the end of February.

But this year, in January alone, retailers that undertook seasonal hiring shed all of the Christmas-time positions plus another roughly 96,000 jobs, the Labor Department said.

The employment report for January is the latest sullen news indicating that conditions for retailers are continuing to deteriorate.

On Thursday, the group reported a 1.8% drop in same-store sales for January, its 12th consecutive monthly decline.

Following the same-store-sales reports, Standard & Poor's placed the ratings of just about all of the major department stores on its credit watch, with implications for debt downgrades. Nordstrom Inc. (JWN), J.C. Penney Co. (JCP), Sears, Dillard's Inc. (DDS), Macy's and Neiman Marcus Group Inc. (NMGA) are all very vulnerable to a recession that is likely to accelerate in the first half of this year, S&P said.

Steep discounting over the fourth quarter will weigh on margins and earnings that most retailers begin reporting later this month.

S&P projects a nearly 30% decline in year-over-year per-share earnings for the period, to $1.75 from $2.45, for the roughly 100 members of its retail index.

The ongoing economic downturn makes retail stocks still a risky bet, despite their upside movement in recent sessions, said Richard Hastings, consumer strategist at Global Hunter Securities LLC.

"Happy moments don't stick because valuations are getting so brutal," Hastings said.

-By Karen Talley, Dow Jones Newswires; 201-938-5106; [e-mail]