Saturday, March 5, 2011

Retail Trade

March 4, 2011
Retail jobs are disappearing as shoppers adjust to self-service

Automation — long a force in agriculture and manufacturing — is accelerating in the retail sector, a trend that could hamper efforts to bring down the nation's stubbornly high jobless rate.

The new employment report is out and the first thing my eye went to was the drop in retail trade. It has really been struggling in recent years.

The following chart shows retail trade employment per capita. The retail trade employment bubble is over and there's no going back.

The following chart shows retail trade employment as a fraction of nonfarm payrolls. Roughly 1 job out of every 9 jobs is located in this industry and the trend just isn't looking good for workers here.

BLS: Retail Trade (2009)

1. Retail Salespersons: 3,891,310
2. Cashiers: 2,828,730
3. Stock Clerks and Order Fillers: 1,303,730

BLS: Retail Salespersons

Despite the growing popularity of electronic commerce, the impact of online shopping on the employment of retail salespersons is expected to be minimal. Internet sales have not decreased the need for retail salespersons.

I strongly disagree. The following chart shows the exponential growth in nonstore retail sales per capita and is adjusted for inflation. It is growing at 5.1% per year in real terms and it is back on trend. I have never spoken to a retail salesperson when making an online purchase.

BLS: Cashiers

Continued growth in retail sales is expected, but the rising popularity of purchasing goods online will limit the employment growth of cashiers, although many customers still prefer the traditional method of purchasing goods at stores. Also, the growing use of self-service checkout systems in retail trade, especially at grocery stores, should have an adverse effect on employment of cashiers. These self-checkout systems may outnumber checkouts with cashiers in the future in many establishments. The impact on job growth for cashiers will largely depend on the public's acceptance of this self-service technology.

I strongly agree. It would seem the same person did not write both outlooks.

BLS: Stock Clerks and Order Fillers

Job openings in grocery, general merchandise, clothing, and department stores will be greater than in other industries, because much of the work is done manually and is difficult to automate.

Innovation starts as a trickle and progress never ends. Just because something is difficult to automate now does not mean that it will always be difficult to automate. In fact, it is already starting to happen.

Minimization of manpower requirements
Lowering expenses for stocking of shelves

Robotic Nation by Marshall Brain

The problem is that these systems will also eliminate jobs in massive numbers. In fact, we are about to see a seismic shift in the American workforce. As a nation, we have no way to understand or handle the level of unemployment that we will see in our economy over the next several decades.

These kiosks and self-service systems are the beginning of the robotic revolution. When most people think about robots, they think about independent, autonomous, talking robots like the ones we see in science fiction films. C-3PO and R2-D2 are powerful robotic images that have been around for decades. Robots like these will come into our lives much more quickly than we imagine -- self-service checkout systems are the first primitive signs of the trend.

As a former lead software engineer, I believe it. We haven't seen anything yet. In a perfect world, this would create a huge improvement in our standard of living. Too bad we don't live in a perfect world. We live in this one.

Source Data:
St. Louis Fed: All Employees: Retail Trade
St. Louis Fed: Total Nonfarm Payrolls: All Employees
Monthly & Annual Retail Trade
St. Louis Fed: Population
St. Louis Fed: CPI-U


getyourselfconnected said...

Automation is a blessing and a curse. Soon it will be our downfall as I have said for a long time! Nice post all kidding aside.

Stagflationary Mark said...


I know! I wish more people could see it.

Exponential growth always seems to work out this way though.

Few get the "start with a penny and double it every day for a month" compounding of interest problem. You've only got 64 cents at the end of the first week but you've got $5.4 million at the end of the month. Of course, you'd have twice that much if you did it in a month with 31 days in it instead of 30.

Exponential growth is sneaky that way.

Here are two people who vastly underestimated the power of exponential running.

getyourselfconnected said...

Too funny. I wanted to say that you have been on a roll of great posts but I didn't want to jinx you.....too late now!

dearieme said...

In a comment on an American blog a couple of years ago, I described how my wife shops at Waitrose, a British supermarket - the American readership refused to believe how efficient the experience is. That is to say, it's not only labour-saving for my wife, but it reduces the company's need for employees too. And this from a company that is an employee-owned co-operative!

mab said...

Exponential growth is sneaky that way.

It might not be a problem.

We shall use my larger scales. - Monty Python, the witch scene

It never gets old for some of us!

MaxedOutMama said...

Mark - I noticed this too - in fact, retail was one of the first things I checked in this month's employment report.

I think in part some of the automation is being driven by expected employee costs under Obamacare. Larger employers now have a huge incentive to export or eliminate jobs.

I also think some of this is directly attributable to the same trends shown in Q4 retail same store results. Higher end chains did great, and the lower on the scale you got the worse they did.

Stagflationary Mark said...


You are too kind, especially after sending me a coin in the mail that's now worth a whopping $35! :)


...American blog... refused to believe...

Isn't America great? ;)


Monty Python is also offers a good analogy for the crisis. I asked the loan officer for a loan and he said in this economy I'd need to back it with a Holy Grail. We got the loan! I told him we already got one!


I think rising gasoline prices are also a major factor. There are so many headwinds for retail trade jobs. At some point we're going to figure out that if we stop shopping at the malls then we'll also probably stop dining at the restaurants near the malls too. Then what? The restaurant industry has 9.6 million workers.

BLS: Food Services and Drinking Places

A growing population that increasingly prefers the convenience of eating out and having their meals prepared for them will contribute to job growth and a wider variety of employment settings in which to work.

I'm not buying the theory long-term. Maybe I'm just too pessimistic but if everyone turns as frugal as I am someday then we're in big trouble.

getyourselfconnected said...

You are too kind, especially after sending me a coin in the mail that's now worth a whopping $35! :)"

Geez, your welcome!

Stagflationary Mark said...


I figure I probably owe you an additional thank you. What once represented a lunch for two at McDonalds now represents a dinner for two at a steak house. Well, almost. :)

AllanF said...

now represents a dinner for two at a steak house.

Aye, but for how long? I'm seeing pass-through at the grocery store more and more. At Kroger's ground beef has been $3/lb at least since January, up from $2/lb all last summer. At one of the locally owned chain groceries, the store brand eggs we've been buying for the last year or two were hiked from $2 to $2.20/doz and the 1/2 gallon cardboard containers of local dairy milk were hiked from $1.80 to $2.20.

Charles Kiting said...

I think in part some of the automation is being driven by expected employee costs under Obamacare. Larger employers now have a huge incentive to export or eliminate jobs.

Where I've seen it is in union shops. The unionized grocers in my area have at least half of their checkout lanes as self-checkout; the non-union stores have zero.

I stopped going to the union-controlled grocers because the prices are too high and the store experience is simply one irritation after another: the constant TV blaring in the checkout aisle (either commercials or the most insipid people-magazine type of crap), the loyalty cards, etc. The newest irritation is lower prices WITH the loyalty card AND a coupon, loyalty alone simply isn't enough anymore for these stores. I have an acquaintance who is a store manager at one of these stores and he said business is bad - I mentioned the things at the stores that irritated me and he said (paraphrasing) "I know, we've had those complaints for years and corporate doesn't care. And on top of that we're getting killed on price." And their self-checkout lanes are overseen by a cashier anyway - they want to you to do their work but they don't really trust you.

Stagflationary Mark said...

Charles Kiting,

The newest irritation is lower prices WITH the loyalty card AND a coupon, loyalty alone simply isn't enough anymore for these stores.

The latest grocery sale wants me to go online to fill THEIR card with THEIR discounts.

Very irritating!