Weak jobs number in store(s)

Retail employment could be an area of weakness in Friday's job report, despite the start of the holiday shopping season.

NEW YORK (CNNMoney.com) -- A generally modest November employment report is due Friday from the Labor Department, and don't be surprised to find weakness in an area where you'd expect strength this time of year: the local shopping mall.

The fact is that the retail sector has been more hurt by the downturn in housing than commonly assumed. And the forecasts of only modest gains in holiday sales this year, coupled with more precise hiring practices by retailers, could result in the retail employment figure showing a decline, rather than a gain.

The report also includes statistical adjustments that could result in the retail sector reporting a drop in jobs, even as employers in the sector are in fact adding hundreds of thousands of seasonal workers.

Overall, U.S. employers are forecast to have added only 70,000 workers to payrolls in November, according to estimates from economists surveyed by Briefing.com. That's well off of the 166,000 gain seen in October. The unemployment rate is forecast to rise to 4.8 percent from 4.7 percent the previous month.

There are some bullish signs for the jobs report. On Wednesday payroll processor ADP released its reading on private sector employment gains in November, reporting a much stronger than expected 189,000 new jobs in the month, more than tripling forecasts for a gain of 50,000.

But job placement firm Challenger Gray & Christmas reported Thursday an increase in job cut announcements in November, even as layoffs in areas directly affected by the subprime and housing problems retreated.

Retailers went into this holiday period with expectations of relatively modest sales. According to sales tracker Thomson First Call, on Nov. 16 the forecast was for a sales gain of only 2.9 percent in November at stores open at least a year, an important retail measure known as same-store sales.

Actual performance actually topped those forecasts, as chains reported a combined 4 percent gain on a solid start to the holiday shopping season. But those sales came well after the hiring plans, and new retailer workers, were in place.

Among those with modest sales gains forecasts is Wal-Mart Stores (Charts, Fortune 500), the nation's largest private sector employer, which posted only a 1.5 percent gain in same-store sales in November. That was a bit better than forecasts, but the retailer is expecting a modest 1 to 3 percent sales gain in December.

Some specialty and apparel retailers reported much weaker sales. Limited Brands (Charts, Fortune 500), which includes the Victoria's Secret and Bath and Body Works chains, saw same-store sales fall 7 percent in November, worse than the forecasts of a 5 percent decline, and far below the 12 percent gain it reported a year earlier.

The growth of online shopping also reduces the staffing needs of retailers. So-called Cyber Monday, the first day after the Thanksgiving weekend that is typically one of the busiest days for online purchases, saw a 21 percent jump in sales to a record $733 million, according to ComScore Inc.

That's far bigger than the estimates of between a 4.8 to 8.3 percent increase in sales at brick-and-mortar stores on Black Friday, the day after Thanksgiving that is the traditional start to holiday shopping

One sector of retailing that has seen solid growth is the big box or wholesale clubs, which are less employee intensive than a traditional department store.

For example, Costco (Charts, Fortune 500) saw sales in its U.S. stores rise 6 percent in November, matching the gain at the same time last year. Wal-Mart's Sam Clubs saw sales gains outpace those of the Wal-Mart brand stores, and BJ Wholesale (Charts, Fortune 500) saw sales jump 7.7 percent. But those gains don't necessarily translate to a big an increase in hiring.

And there are other reasons to believe that retailers brought on less seasonal help this year.

One is that a number of sectors within retail have been hit by the sharp downturn in housing and home building compared to a year ago. For example, building material and garden supply stores have trimmed more than 30,000 jobs on a seasonally adjusted basis in the last four months.

Home Depot (Charts, Fortune 500), the leader in the sector, has projected declining earnings and sales due to the housing slump, and rival Lowe's (Charts, Fortune 500) announced in mid-November it expected its sales slump from housing to be deeper and longer lasting than it had previously expected.

Employment readings also have been weak for furniture stores as well as electronics and appliance retailers. But the weakness hasn't been limited to those housing-related sectors.

Department store hiring has been down each of the last five months on a seasonally-adjusted basis, as those retailers braced for customers having less money in their pockets due to rising gasoline costs and a mortgage crisis that may also pinch household budgets.

These cutbacks in shopping heading into the holiday season have resulted in retail employment showing a decline in four of the last five months, according to the seasonally-adjusted Labor Department readings.

But all manner of retailers are also learning to get by with fewer employees than they did in the past, said Dan Russell, vice president of Aon Consulting, who advises many retailers on hiring practices. He said the holiday hiring rush isn't quite as intense as it used to be because of the changes in staffing practices.

"Finding people, interviewing them, training them - there's a lot of overhead in bringing on a lot of temporary employees," he said. "Holiday hiring hasn't completely gone away. But what we're seeing is companies trying to stabilize their head count and not have as big a spike."

He said retailers are using more targeted scheduling to limit the hours that extra staff is needed, while in the past the seasonal hires were spread relatively evenly from the day after Thanksgiving to Christmas Eve.

"They're much more sophistication for how they're scheduling people, with shorter shifts or swat team shifts," he said.

In addition, the growth of gift card sales, which pushes more of the actual shopping into January, reduces the need for large staffing levels in December. And the longer holiday shopping season, with about an extra week between Thanksgiving and Christmas this year, will spread out the shopping season and allow retailers to make do with fewer extra workers.

Because the numbers are seasonally adjusted, the Bureau of Labor Statistics makes adjustments for things such as the expected hiring surge by retailers in November.

Last year, the seasonally-adjusted retail number showed a gain of 30,100 retailer workers in November, even though the raw numbers showed a record 418,200 added to retailers' payrolls. Strong holiday hiring in 2006, as well as in 2004 and 2005, has set the bar rather high for this year's hiring. Retail employment could post a seasonally-adjusted drop in employment in the report, even if retailers in fact added more than 200,000 workers.

So the holiday shopping season might not provide much of a lift for a weaker labor market overall when the government releases its report.