Retail: Help Wanted! (Dec 98 article)
By J. Charles Joo and Joseph Slepski, Research Analysts

Since hitting a low point in December of 1992, Connecticut retail trade employment has been growing steadily, along with yearly increases in retail sales. After losing more than 30,000 jobs in the last recession, the retail sector, which accounts for nearly one out of every five jobs in Connecticut, has regained almost half its loss. Between 1992 and 1997, the industry's employment grew by over 14,500, or 5.7 percent.

This article examines the retail sector's employment, wages, sales, seasonality, and future outlook. Detailed employment and wage data for all subsectors (4-digit Standard Industrial Classification levels) of the retail industry are also summarized on page 4.

Retail Employment

Retail trade's employment had been growing each year for many decades before declining from 1989 to 1992. Since then, the industry has seen five consecutive years of growth. Connecticut's retail employment trends were similar to, although below, the nation's growth rates throughout the last decade.

In 1997, almost a third of all retail jobs were in eating and drinking places. This industry group also gained the most jobs (+5,300) from 1992 to 1997, reflecting a rising trend in dining out with the improving economy. (For more on the eating and drinking places industry, see the January 1998 issue of the Digest at www.ctdol.state.ct.us/lmi/misc/digindex.htm) The second largest retail industry was grocery stores, accounting for over 40,000 jobs, and it grew two percent between 1992 and 1997. The greatest employment growth was in miscellaneous food stores, with a 150 percent increase. The rapid expansion of bagel and donut franchises helped to add 3,200 new workers (74%) in retail bakeries, which had the second highest growth both in number and percent of retail jobs. With both the historically low interest rates and recovering economy, more customers were buying cars, thus prompting auto dealers to hire 1,700 additional staff (see also February 1998 Digest). Along with the Pentium-speed growth in the computer services industry (November 1997 Digest), computer and computer software stores have also expanded their workforce by over 1,000 since 1992.

Other notable trends include the rapid increases in non-store retailing such as the catalog and mail order industry (through TV, phone, online shopping), which added 700 jobs, representing an increase of 33 percent from 1992 to 1997. As the housing market rebounds, the lumber and other building materials dealers, spurred by "super" chain stores, have added nearly 1,000 new jobs (+17%) in the past five years. However, some sectors of the retail industry did not fare so well. Mainly due to the closing of major department stores during the recession of the early nineties, the department stores industry eliminated over 2,100 jobs, and women's clothing stores lost over 2,000 workers, a significant drop of 31 percent between 1992 and 1997.

Retail Wages

The average wage rate in retail trade in Connecticut is still the lowest among the major industry divisions, averaging just $228 a week in 1997 (although this lower wage is skewed by the large number of part-time workers in this industry's workforce). That was a 13 percent increase from 1992, but inflation as measured by the Consumer Price Index was 14 percent, and the average wage rate for all industries rose 19 percent during the same period.

The retail trade industries where wages declined include bookstores, miscellaneous food stores, miscellaneous apparel and accessory stores, and shoe stores. On the up side, the average wage at motor vehicle dealers, miscellaneous homefurnishings stores, retail nurseries, jewelry stores, furniture stores, and catalog and mail order sectors grew faster than did the average for all industries. In 1997, the highest wage was paid out to the employees of computer and computer software stores, while the lowest was paid at retail bakeries.

Retail Sales

Connecticut retail sales grew in the last decade, except in 1990 and 1991 (during the height of the recession) when they were down by 5.4 and 1.1 percent, respectively. In comparison, the nation sustained retail sales gains each year over the 1988-97 period. However, after trailing the U.S. from 1989 to 1995, Connecticut sales were higher than the nation's in 1996 and 1997. Still, current extreme market volatility, overseas weakness, and more layoff announcements could affect sales during this holiday shopping season.

Retail Seasonality

There are many industries in Connecticut influenced by seasonal factors, but none more so than the retail trade sector. This particular industry experiences many peaks and valleys during the course of a year. The highest peak occurs during the months of November and December. During this decade employment in the retail industry has increased by an average of 11,575 during these two months. These seasonal gains ranged from a low of 7,700 jobs in the recession-ravaged year of 1990 to a high of 13,400 in 1997. The holiday season seems to be recession-proof in terms of staffing needs as evidenced by the fact that in 1991 and 1992, when the economy was at a low point, employment in retail establishments increased by 12,300 and 11,800, respectively.

In the retail sector, however, what goes up in November and December must come down in January. In just one month all of the holiday gains are lost as employment sinks to levels that were reached the previous September. Just as the earlier mentioned gains were recession-proof, the losses are prosperity-proof as evidenced by January declines of 17,100 in 1996, 17,800 in 1997 and 17,000 in 1998.

So What's In Store?

The latest retail employment estimates show an increase of 900 jobs over last October, or a growth of 0.3 percent over the year (page 14). This was the smallest over-the-year October gain in the last six years. As help-wanted signs are posted on many stores this Christmas season, the increasing shortage of available or willing workers may cause a drag on the industry.

Nevertheless, so long as consumer spending is sustained, the State's retail trade sector should continue to generate jobs in the near future. A new Filene's Basement, a retail apparel store, opened this fall in Stamford, adding 85 jobs. Another Big Y Foods supermarket store opened in Enfield, which added 300 more employees to industry payrolls. Lowe's Home Improvement Center also opened in the Wallingford Plaza, with another 200 jobs.

According to Connecticut Labor Department projections, retail employment is expected to grow almost ten percent by 2006, an addition of 23,600 jobs. Job openings for retail salespersons are forecast to be among the fastest growing occupations, adding almost 2,300 jobs annually through 2006. Other retail occupations on top of the list are cashiers and waiters & waitresses, with 2,200 and 1,600 job openings annually.

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Industry Clusters
Economic Board Convened

Connecticut, regional, and world economic outlooks, progress of the industry clusters, and transportation issues were featured topics November 20 at the annual conference of the Connecticut Economic Conference Board. Economic outlook speakers included former CECB Chairman Dr. Ed Deak; Steven Lanza, Managing Editor of The Connecticut Economy; and Ed Guay, Wintonbury Risk Management.

Connecticut will experience growth, but at a much slower rate of job and real gross state product increases according to the New England Economic Project outlook presented by Deak. Other speakers saw sound current economic fundamentals, but risks associated with national and world events.

A report on the progress of the industry clusters was highlighted by bioscience, manufacturing, and workforce development presentations. Connecticut's seaports, aviation infrastructure, and ground transportation were also addressed. A major development making Bradley International Airport a "perishables center" will occur with the signed lease by Rainbow Growers. This large flower producing group from the Netherlands plans to construct a 100,000 sq. ft. distribution and refrigerated packaging facility and provide the airport with its first direct air cargo service to Europe.

A full CECB "Report to the Governor and the General Assembly" will be submitted in early 1999.

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Housing Update
October Housing Permits Up 20.3%

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development announced that Connecticut communities authorized 1,025 new housing units in October 1998, a 20.3 percent increase compared to October of 1997 when 852 were authorized.

The Department further indicated that the 1,025 units permitted in October 1998 represent an increase of 4.2 percent from the 984 units permitted in September 1998. The year-to-date permits are up 21.9 percent, from 7,871 through October 1997, to 9,595 through October 1998.

"Housing permits are up throughout the state, with particularly strong growth in Fairfield, Hartford, and New London counties," counties," Commissioner Abromaitis said. "As a symptom of the overall health of our economy, the increase in permits is a very encouraging sign."

Reports from municipal officials throughout the state indicate that New London County with 40 percent showed the greatest percentage increase in October compared to the same month a year ago. New Haven County followed with a 28.3 percent increase.

Fairfield County documented the largest number of new, authorized units in October with 274. Hartford County followed with 239 units and New Haven County had 195 units. Danbury led all Connecticut communities with 105 units, followed by Manchester with 98 and Milford with 30.

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Connecticut Economy's Future Camouflaged By SNET Strike

The Connecticut coincident and leading employment indexes both declined with the release of (preliminary) September data. The coincident index after having reached new peaks in each of the last three months backed down to a level last seen in April and May of this year. The leading index fell for the fourth consecutive month and is down on a yearover- year basis. The leading index declines in August and September probably reflect in large measure the GM and SNET strikes. As such, the signal sent by the leading index about the future of the Connecticut economy is camouflaged.

The leading index, a barometer of future employment activity, is now at a level not seen since November 1995. As stated last month, the June decrease in the leading index was largely a result of the higher initial claims for unemployment insurance. The July fall resulted from lower Hartford help-wanted advertising and a higher short-duration unemployment rate. The August drop reflected higher initial claims for unemployment insurance. The much larger decline in September incorporates a much higher initial claims for unemployment insurance (its highest level since December 1996), a much lower Hartford help wanted index (its lowest level since August 1996), and a much reduced average work week of manufacturing production workers (a level not seen since January 1996).

A reversal in the direction of movement of the leading index for three consecutive months, as noted in previous columns, generally precedes a change in the direction of the economy by six-totwelve months. As a consequence, the September data provide one more reason to question the sustainability of the current expansion. The signal sent, however, is muted significantly because of the SNET strike. We shall monitor the release of new data in the remaining three months of 1998, hoping to receive a clearer indication of the future path of the Connecticut economy. Will the leading index continue its downward trend? Or will it turn on its heels and re-establish its recent upward trend?

In summary, the coincident employment index rose from 90.5 in September 1997 to 94.8 in September 1998. All four index components, once again, point in a positive direction on a year-overyear basis with higher nonfarm employment, higher total employment, a lower insured unemployment rate, and a lower total unemployment rate.

The leading employment index fell from 89.9 in September 1997 to 87.3 in September 1998. Four of the five index components sent negative signals on a year-overyear basis with a higher shortduration (less than 15 weeks) unemployment rate, lower Hartford help-wanted advertising, a shorter average work week of manufacturing production workers, and higher initial claims for unemployment insurance. The other component sent a positive signal on a year-over-year basis with higher total housing permits.

SOURCE: Connecticut Center for or Economic Analysis, University of Connecticut. Developed by Pami Dua [Economic Cycle Research Institute; NY,NY] and Stephen M. Miller [(860) 486-3853, Storrs Campus]. Campus]. Kathryn E. Parr and Hulya Varol [(860) 486-3022, Storrs Campus] provided research support.

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