This holiday shopping season is shaping up to be a bleak one for retail stores but not quite as bad as Friday’s jobs numbers might lead some to think.
The Labor Department reported that employment in retail contracted by 34,700 jobs in November, a month when many retail stores usually hire workers to handle the holiday shopping rush. That was worse than analysts expected and likely reflects the fact that many stores were forced to operate at reduced capacity, which cuts sales but also cuts down on the need for additional holiday employees.
The contraction, however, vanishes if we remove the seasonal adjustment. The Labor Department attempts to smooth out jobs data by adjusting the figures for seasonal variations in different industries. The purpose of this is to give a better picture of the health of the labor market. In retail, the adjustment assumes a massive amount of hiring in November. That can mean that even if stores hire thousands of addiitional workers but less than the adjustment expects, it can show up as a monthly contraction.
Employment in retail actually increased 302,100 in November to 15,487,600. The seasonal adjustment counts this total employment number as 15,122,100, which is below the seasonally adjusted number for October and so gets counted as a contraction.
This is not unique to this year. Last year, the seasonally adjusted data showed a November contraction of 13,900 jobs and the unadjusted data had employment growing 431,900. The following month, seasonally adjusted employment jumped 41,4000 but unadjusted employment rose by just 79,500.
Back in 2018, November’s seasonally adjusted data showed retail employment rising by 27,100 and December’s showed it falling 25,200. The unadjusted data had employment rising by 482,200 in November and rising 6,000 in December. The October data for that year had retail shedding 38,100 jobs on a seasonally adjusted basis and adding 102,200 on a seasonally adjusted basis.
In other words, the seasonal adjustments—which are aimed at concealing the seasonal changes to employment—create a distorted picture when it comes to holiday hiring. And with retailers starting holiday discounting earlier in recent years, the adjustments appear to be introducing volatility month to month.
This doesn’t mean the market for retail labor is strong. The seasonally adjusted contraction indicates that compared with a “normal” November, hiring was weak. But no one really needed to be told that by the statisticians at the Department of Labor.
The retail numbers may also be thrown off by the fact that the rise of online shopping has changed seasonal hiring and the pandemic has accelerated that change. Transportation and warehousing added 145,000 jobs in November on a seasonally adjusted basis, the biggest ever jump. Not seasonally adjusted, transportation and warehousing added 260,800 workers, also a record high. And the trend for years has been bigger holiday season lifts in this category. Ten years ago, the economy added just 24,000 transportation and warehousing jobs in November without seasonal adjustment, a number that was barely higher than the decade before that.
In the age of online shopping and social distancing, warehousing and shipping probably need to be counted alongside retail when it comes to trying to gauge demand in the holiday season economy.