The Retail Jobs Apocalypse Might Doom Trump’s Jobs Agenda
Strangely enough it is getting real easy to feel sorry for President-Elect Donald J. Trump. The growing retail apocalypse might make a mockery of the Donald’s promises of millions of new jobs, and there might be little he can do about it.
During the first week of January 2017 Trump; and his cheerleaders, in the media were trumpeting Ford’s decision to add 700 manufacturing jobs in Michigan. On January 4, Macy’s (NYSE: M) announced that it was eliminating 10,100 jobs. Disturbingly 6,200 of the positions Macy’s plans to kill are management; back office and warehouse work, many of which are well paying middle class jobs.
Nor was it just Macy’s, Sears Holdings (NASDAQ: SHLD) announced plans to close 196 stores around 10% of its footprint. Since Sears employed around 178,000 people in May 2016, that means as many as 17,800 individuals will lose their jobs.
Frighteningly these job losses might be just the tip of the iceberg. The business press was reporting that Kohl’s (NYSE: KSS); another major department store chain had a bad holiday season. Beyond Kohl’s there’s Target (NYSE: TGT) which has been suffering from major revenue losses, and JC Penney (NYSE: JCP) which has been struggling to survive.
Smaller more specialized retailers are in even more trouble. Over the past year, entire chains including Sports Authority have simply disappeared.
Tens of Thousands of Middle Class Jobs are vanishing
Trump defenders might say that most of those jobs are low paying part time positions. That’s only partially true; there are many middle class jobs in retail, including store managers, assistant managers, buyers and truck drivers. There are also many working and lower-middle class families where that part-time job enables the family to meet the mortgage or rent payment.
The devastation can extend far beyond the walls of the closed stores. Every one of those shuttered locations is supplied by truck. That means several truck-driving jobs; fairly well-paying class positions, will be eliminated. It also means that the trucking company might have to lay off a dispatcher, a mechanic and possibly a manager or a member of the office staff.
There are also the local governments that have to lay off police officers, firefighters or snowplow drivers because of lost sales and property tax revenue. To this list we can add professionals such as the plumbers and electricians that service the store, and the guys who install and service the cash registers, elevators and escalators. All of them have less work, and possibly no jobs.
Walmart is killing Thousands of Middle-class Jobs
This retail jobs apocalypse is spreading far beyond stores that are closing. Walmart (NYSE: WMT); a retailer that experienced some revenue growth, is eliminating 7,000 back-office clerical positions. Back office is retail slang for the people who work in the store’s office; performing routine tasks such as counting cash or processing invoices.
Those positions were lower-middle class jobs that paid around $27,000 a year. Many of them were filled by middle-aged working class women who will be hard pressed to find a comparable salary. Walmart plans to replace the cash counters with cash-recycling machines and the invoice processors with a centralized computer program.
Walmart is planning a second even more troubling round of job cuts, The Wall Street Journal reported on January 10. The retail giant plans to hundreds of administrative positions in its human resources department, regional offices and corporate headquarters in Bentonville, Arkansas. The job cuts are reportedly scheduled for the end of January.
Almost all the positions eliminated will be high-paying office jobs that provide a middle class salary with good benefits. Given the economy many of those workers will be hard-pressed to find anything comparable. Some will drop out of the workforce, while others will end up at Walmart behind the cash register or stocking shelves for a far lower wage.
Technology is at the root of this workforce trimming, much of the work formerly done by those HR people can be performed by software. Replacing people with algorithms makes Walmart, leaner, meaner and potentially far more profitable. The company can use those HR workers’ salaries to build more stores or beef up its online retail operation. This might create some new jobs, but it is doubtful they’ll pay what the vanished office positions did. The underlying idea is to cut costs and change the business model to compete better with Amazon (NASDAQ: AMZN).
Amazon of course is the ultimate retail jobs killer because it sells without a store. Its massive fulfillment centers are increasingly staffed by robots, and Jeff Bezos has revealed plans to use drones for delivery. To make matters worse, the company is testing Amazon Go, a next-generation grocery store with no cashiers in Seattle.
Will Trump Tackle the Retail Apocalypse?
The growing retail jobs apocalypse presents a serious challenge to Trump and his rather old fashioned economic policy of infrastructure stimulus and tariffs. For every job Trump claims to create, a dozen more are vanishing.
The fawning news coverage about all the new Trump jobs will seem like a gruesome joke to all the newly unemployed store managers and cashiers. It will hit especially hard in working-class towns like Craig, Colorado, where the closed Kmart was one of the few employers in town.
Sears’ death spiral might hit Trump hard because many of the stores on the latest closing list are in small towns and cities in the industrial Midwest, the South and rural West. Places like Platteville, Wisconsin, and Phenix, City, Alabama. In other words; Trump country, where Donald is widely viewed as a job-saving hero.
That will be good news to Democrats; and to all the Republicans who hate Trump. The mobs in the Rust Belt will need a scapegoat for the job losses; and billionaire Donald with his private jet, trophy wife and Manhattan penthouse will make the perfect scapegoat. It will be terrible news for those members of the GOP who have jumped on the Trump bandwagon.
Dilemma for Donald
This also puts Donald in a quandary because the retail apocalypse is being driven by forces beyond the President’s control. Forces buffeting retail include technological progress, changing shopping habits, wage stagnation, falling prices and income inequality.
There is little the President can do to counter these changes beyond encouraging people to shop local or shop brick and mortar. Beyond that he might attack Amazon.com as some observers have suggested.
That presents a world of peril because Jeff Bezos is a relentless opponent who is clever, ruthless and very rich. It also creates the potential to drive away many middle class voters that love shopping on Amazon. After all nobody wants to be told they are contributing to job loss with their habits.
There is no easy boogeyman for Trump to target here. When he talks trade Donald has Mexicans and China to bash. Ecommerce and changing patterns of shopper behavior are hard concepts to explain to voters with a high school education.
Trump is a very creative guy and a pretty shrewd political strategist. Yet even this might beyond his abilities to deal with, which is why he is ignoring the retail apocalypse for now.
Sooner or later, Trump will have to face the retail-jobs apocalypse, particularly if he wants to get reelected. Although dealing with it might doom his administration, because it might expose just how ineffective his policies might be and how hollow his promises seem.