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Another holiday sales hitch: fewer jobs

Rapidly deteriorating employment picture bodes ill for merchants trying to salvage their key season.

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By Parija B. Kavilanz, CNNMoney.com senior writer

1.9 million jobs lost in 2008
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NEW YORK (CNNMoney.com) -- The steep plunge in jobs in November presents yet another harrowing scenario for beleaguered merchants who are grappling with one of their worst holiday shopping season in years.

"This is definitely another negative hitting retailers," said Scott Hoyt, director of consumer economics with Moody's Economy.com.

Retailers have been struggling all year to lift sagging sales as more Americans, nervous about an economy in recession, are making serious cutbacks on non-essential purchases like new clothes, shoes and electronics.

On Thursday, retailers posted one of the worst monthly sales declines in at least eight years.

Hoyt and others say that the fear going forward is that a rapidly deteriorating job market will only stall sales further because consumers won't shop for discretionary items if they are insecure about their jobs.

The government reported that the U.S. economy lost 533,000 jobs in November, the worst monthly loss in 34 years. Of that total, retail-related jobs declined by 91,000 in the month.

Although most of the retail job losses occurred among automobile and auto parts dealers, they were also spread out across the board in core retail sectors.

Clothing and accessories stores shed 17,600 jobs in November, consumer electronics sellers lost 6,700 jobs and furniture merchants cut 9,800 jobs.

Elsewhere, department stores logged 3,500 job cuts, and sports, hobby and music stores combined shed 10,700 positions last month.

Retailers typically avoid layoffs and instead shore up their sales staff during the key November-December holiday gift-shopping months. Those two months can account for as much as 50% of merchants' profits and sales for the year.

To that end, industry analysts pointed out that many of last month's retail layoffs were associated with chains such as No. 2 electronics seller Circuit City (CC, Fortune 500) that is closing some of its locations while it restructures under bankruptcy protection.

Therefore, Hoyt said he's tracking the level of seasonal retail hiring last month - and in December - as a better indicator of what to expect for holiday sales.

There's bad news in that measure as well. "Retailers aren't hiring as many seasonal workers," said Hoyt. "We've seen anecdotal reports that show consumers want the temporary jobs but can't find them."

The government reported that merchants hired 217,200 temporary workers last month, compared to 457,600 temporary retail workers added last November.

"These seasonal workers are important [to retailers] because the temporary jobs provide income for them to spend in stores over the holidays," Hoyt said. "No job means no income and lost sales."

That said, another industry watcher said he's doubtful that more holiday hiring would indeed have boosted sales, given the state of the economy.

"Fundamentally, what's driving the performance of retailers during the remaining days of holiday season has less to do with the number of workers in stores but (with) the psychology of the shopper in a weakening economy," said Frank Badillo, vice president and senior retail economist with Retail Forward.  To top of page

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