For more than two months, the toll of unemployment in the U.S. has grown each week. The retail sector, which was already struggling before the pandemic, is among the hardest hit, with stores closed or at reduced capacity and consumers nervous about spending money. And many economists believe these lost jobs will not be returning anytime soon. Economics correspondent Paul Solman reports.
For more than two months, the toll of unemployment in the U.S. has grown each week.
Many economists and experts believe some of these lost jobs will not come back any time soon.
That is of particular concern in the retail sector. Today, Macy's said that sales were down 45 percent.
Economics correspondent Paul Solman reports on retail's plunge for our series Making Sense.
They shut everything down, and we were all furloughed.
Over two million Americans have now lost their jobs in retail. Like Janet Dee, 43 years with Macy's in New York.
This is going to be devastating to so many people.
Violet Moya lost her job at a Houston Sephora six weeks ago. And still hasn't received unemployment benefits.
I did apply for food stamps. It did, thankfully, went through, thankfully, because I didn't know how was I was going to buy food.
Stores shed jobs, of course, as sales plunged, a record 16.4 percent down from March to April, a bloodbath for the economy, since retail accounts for about half of all consumer spending, which in turn drives some 70 percent of economic activity.
When we first entered lockdown, there was a hope that this would be very quick, it would be a kind of V-shaped recovery. I think most retailers now no longer hold on to that hope.
Neil Saunders monitors the sector for GlobalData Retail.
You have still got a lot of economic distress, massive unemployment, a lot of people very uncertain about the future. It probably won't be 2021 before we get back to any semblance of normality in retail.
In acute pain, clothing stores, where sales have tumbled nearly 80 percent. Already struggling department stores are down about 30 percent.
It's just a scary situation.
Sales associate Janet Dee was furloughed from a Macy's on Long Island after it closed in March.
Are the cutbacks like this going to be for one year, two years, three years? You don't know. So it's unnerving.
Especially for Dee, as a union rep.
Janet Dee Our contract is up this month. So we have tried to get the company to agree to a one-year extension on to the current contract. But they did not want to go for that. So, then we asked for a six-month extension, but they didn't want to go for that either.
Workers like Dee have far less bargaining power than they did just months ago, says Saunders.
Before this crisis, we had very full employment. You had to pay attractive salaries, good bonuses to get those people to work for you. The problem now is that that situation has reversed.
Violet Moya has been living off her stimulus check, still waiting for those unemployment benefits, looking, unsuccessfully, for work.
I applied at Target. I applied at H-E-B and Aldi's. I applied at what I knew would be open.
So, I even tried to DoorDash, but I only have one vehicle, and my brother already does DoorDash. The other day was so bad that he made like $3 in a day. And he was like, oh, my goodness.
You mean $3 an hour?
No, a day, because there's thousands of other people on the app that joined because of what happened, because of the pandemic. There's no jobs. So a lot of people are doing those jobs now.
The pandemic has speeded the shift to online, predicted to jump from 15 percent of all retail to fully a quarter, good for virtual stores, disastrous for ones you can walk into, many of which have now gone under.
But in the case of two of the biggest names, J. Crew and Neiman Marcus, an added problem was the way they'd been financed, by something called private equity.
Ten out of the 14 bankruptcies in retail in recent years have been private equity-owned companies. So we expected them to be the first to go down when the COVID-19 crisis hit.
Cornell professor Rosemary Batt studies the private equity industry.
Their financial model makes it such that, if there's any disturbance at all, they're likely to go under.
Now, private equity firms are investment partnerships that buy companies, including retailers that have supposedly steady cash flows.
They buy them with debt, and that debt gets put onto the balance sheet of the retailer they're buying. So, this leaves the retailer with an enormous debt pile that they then have to service.
As a result, it's harder for retailers to both pay their debts and stay current to compete with behemoths like Amazon and Walmart.
They don't have the funds to invest in upgrading their stores and their merchandise and developing their online capacities in the ways that others have.
Ann Marie Reinhart:
I watched all those changes happen when they had the leveraged buyout.
After almost three decades at Toys 'R' Us, Ann Marie Reinhart was laid off two years ago, when the company went bankrupt, after a private equity takeover.
At first, I did not understand the process, that you could buy a company for $6 billion, put $1 billion down, and then force the company to pay the balance of that loan.
But with private equity firms, they extract all the profits, so that no other company can really get out from under that debt.
In March, Reinhart was furloughed from Belk, the North Carolina-based retail chain, where she'd next taken a job.
I was under the impression that they were family-owned. And then someone said, yes, well, ever since they were bought us out, and I was like, what? And they said, yes, that we were sold to a private equity firm.
To me, it was deja vu working at Toys 'R' Us, is, you know, they started, you know, cutting supplies and eliminating positions and cutting payroll, et cetera. And now here I am living the same thing all over again.
Private equity's response? The industry's lobbying group sent us this: "The private equity industry is working around the clock to save retailers and support their employees. We are all in this crisis together."
Now, across the country, some stores are opening up. But, say would-be consumers Leslie and John Dorman on Beverly Hills' fabled Rodeo Drive:
Even if retailers open, are people ready to go shopping?
You know, I want them to reopen things safely. I'm not in a rush to get things back to where they were before this hit.
And neither are retail workers like Macy's' Janet Dee.
It's not like where you can just stand behind a counter and just ring the customer up, and then just push the package up. There's a lot of service areas, cosmetics, fragrances, the mattress department.
People come in, they want to lay on a mattress. They want to see what they're buying. But how do you keep it safe?
So, workers and shoppers remain wary, says analyst Neil Saunders.
Confidence takes a moment to destroy. It can take many, many months to come back.
But then, even among those who may want to go out and shop and miss that activity, a lot of them don't have the means to do so, or they're reluctant to spend because they're nervous about the economy.
No arguing with that.
For the "PBS NewsHour," Paul Solman.
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Paul Solman has been a business, economics and occasional art correspondent for the PBS NewsHour since 1985.
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