Published Sep-19-2008
Although the holiday job picture cannot be fully determined until the end of January, there are a few smart observations which, when taken as a whole, can give us a fairly good idea of whether this holiday season will be one that produces copious numbers of jobs or one with more coal in the stocking.
Holiday spending depends primarily on one thing: the amount of discretionary income available for people to spend. Discretionary income is the money people have left, after they have paid their taxes and normal expenses for basic needs, to spend at their own discretion. During the holidays, discretionary income is what determines the amount of extra goods and services, such as food, clothes, toys, trees, gifts, and other things people are able to purchase.
Over the last two years, Oregon has gone through a period of increased inflation. This increase in inflation means prices have increased for most basic needs. Energy costs have increased by over 100 percent over the last two years. The cost of gas alone has tripled in the last five years. In an article entitled "Relief at the Pump, Not in the Aisles," The Oregonian tells us the increase in oil prices not only affects energy costs, it also affects anything transported or made with oil as a raw material, such as lotions, toothpaste, and plastics. Even though we have seen recent slight decreases in the cost of a barrel of oil, the wholesale price of some of these products has not budged.
Costs have increased for food, electricity, natural gas, and every other major expense in people's budgets. With tightening credit standards and changes in risk tolerance in the financial industry, mortgage payments have increased for many families. An increase in the price of the necessities of life has caused a decrease in the discretionary income of the majority of Oregonians. With less discretionary income, the capacity for spending non-discretionary items will decrease this holiday season. "Personal income plunged in July and consumer spending slowed significantly …" wrote Associated Press columnist Anne D'Innocenzio.
Sales have slowed for many retailers throughout Oregon. Allison Eggers, manager of the Macy's Department Store in Roseburg, said, "We are seeing a different shopper lately. When in the past we saw people coming in and doing more browsing, lately there have been fewer people browsing. Shoppers come to the store with what they want already in mind, they purchase the product and are spending less time in the store."
The September 3rd edition of The Oregonian reported, "Expert sees bit of panic in retailers' price cuts." In the article, the author, Anne D'Innocenzio, tells of the extremes some retailers are taking to get shoppers into their stores. The story talks about retailers already having a poor fall season. Inventories are at record highs. Industry analyst Richard Jaffe noted, "It's a more prolonged consumer spending downturn. It's going to be tough. There's no quick way out of it."
When money is hard to come by, many people … CHARGE IT! But with banks all over the United States feeling the global credit crunch, finding available sources of credit has become more difficult. In the International Herald Tribune, the managing director of the International Monetary Fund, Rodrigo Rato, is reported as saying, "It has an effect on the real economy which will be felt more in 2008, with greater intensity in the United States, less in other areas." The credit crunch has further tightened the spigot of the monetary valve, and will diminish the amount of money available to Oregon households during the holidays, leading to a poorer outlook for retailers.
In talking with many retailers throughout Oregon, I have found only one that plans on hiring during the holiday season. Macy's Department Stores, in an effort to save money, has centralized its West Coast operations under one division head. Because of this move, the retail chain has realized some cost savings and is planning on putting the money into holiday hiring. According to Allison Eggers, manager of the Macy's Department Store in Roseburg, Macy's is, "Putting extra resources into its people, hoping that an added customer focus will translate into more sales." This move is the effect of a structural change in the company's operations and not a response to projected holiday sales.
Graph 1 shows holiday-related retail sector employment in Oregon for the past seven years. Holiday hiring usually starts around the middle of September and ends in December.
From 2001 to 2003, peak seasonal employment in holiday-related trade industries declined from a high of a little over 127,000 jobs in December 2001 to a low just a hair over 124,000 jobs in December 2003. There was a revival in 2004, with the economy bringing back the number of jobs lost since 2001 and adding another 402 jobs to reach 127,417 in December. During 2005, a larger than average increase brought employment to over 130,000 jobs in December. Since December 2005, each holiday hiring season has added jobs at a decreasing rate. In 2007, the holiday-related retail sector struggled to reach essentially the same December level we saw in 2006.
If the holiday hiring pattern of previous years holds true, look to see fewer holiday-related jobs this year than we have enjoyed in recent years, with the December peak in holiday-related retail trade possibly dropping to 2005 levels. We are wrestling with the uncertainty of an election year, high energy prices, a housing downturn, and a credit crunch in the banking sector of our economy. With all of these things coming to bear on our economy, the outlook is less than stellar for holiday employment in Oregon. Many stockings won't be brimming with the plenty of recent years.
