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American retailers have laid off or furloughed one-fifth of their workers

Worse may be yet to come

AMERICA’S RETAILERS have been clobbered by the coronavirus. Gap, a fashion chain, and Kohl’s, a department-store group, each furloughed 80,000 workers as early as March. Macy’s, the country’s biggest department-store chain, issued pink slips to another 125,000. Last month two more clothing chains, Neiman Marcus and J.Crew, filed for bankruptcy. Few have managed to avoid layoffs. Best Buy, a big electronics retailer, paid its workers in the first half of April, even promising wage rises and bonuses to some front-line staff. Eventually, though, it too gave in, and furloughed 51,000 of its 125,000 employees.

Is there any pattern to these figures? When so many retailers are shedding so many workers, it can be hard to tell—especially when several well-known shops, including Macy’s and Neiman Marcus, beset by competition from online rivals, have been struggling for years. When the industry is divided into its various specialities, though, a fairly clear-cut picture emerges: the bigger the drop in sales, the deeper the job cuts.

The retail sector as a whole employs roughly a tenth of America’s labour force. On May 15th the Census Bureau reported that retail sales totalled $372bn in April, down by roughly 20% from January. A week earlier the Labour Department reported that employment in the sector stood at 13.5m in April, a decline of 13.7% from the start of the year. Repeating this exercise for the dozen-odd sub-sectors included in the Census Bureau’s survey reveals a roughly linear relationship between changes in sales and employment (see chart).

However, the data suggest that some sectors have suffered more layoffs than others, even after taking the fall in sales into account. Health and personal-care stores such as Sephora, a cosmetics chain, were bang on the industry’s regression line, shedding 8.9% of staff after losing 11% of sales since January. Meanwhile firms in the “general merchandise” category, which includes big-box retailers such as Walmart and Target, have axed just 1.9% of their workers this year, despite losing 15% of sales. Electronics stores have spared most of their staff, too, even as revenues have plunged by two-thirds. One reason may be that job cuts have yet to show up in the data (Best Buy announced layoffs on April 15th after the end of the survey period). Another may be that some employers in the sub-sector, such as Apple, which employs 70,000 people in its shops, have offset some lost retail sales with e-commerce revenues, which are recorded elsewhere in the survey.

Other sectors have been particularly heavy-handed. Food-services firms, such as McDonald’s, have laid off nearly half of their employees, or 5.8m people. This is roughly 2.3m more than our (admittedly simple) model would have predicted. Similarly, sporting-goods stores and booksellers, as well as furniture retailers, have furloughed a relatively high share of their workers. Curiously, “nonstore” retailers, a category that includes Amazon and eBay among others, have shed workers this year too, despite selling more in April than they did in January. Supermarkets and other food shops have done the same. These firms may be taking advantage of a crisis to trim the fat—or preparing for an even worse downturn in the months to come.

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