Hiring at the nation's retail stores took a sharp drop last month, reversing several months of gains in what had been one of the economy's bright spots.
The number of retail jobs dropped by over 24,000 in March, according to the latest jobs report from the Department of Labor. It was the largest decline from any sector last month in an overall jobs report that was largely disappointing.
Economists blamed the poor retail performance on colder-than-normal temperatures for much of the country in March, as well as possible fallout from the tax hikes and layoffs from the government's ongoing fiscal woes. But they cautioned not to read too much into one month's numbers.
"I view this as something of a fluke," said Nariman Behravesh, chief economist at the consultancy IHS. "We're going into a soft patch as a result of the sequester, but I don't think it will last more than a few months."
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The job losses were broad-based across retail. Best Buy (BBY) and JCPenney (JCP) have both been cutting jobs in the midst of turnaround efforts. Clothing stores lost over 15,000 jobs, while stores such as Lowe's (LOW) and Home Depot (HD) in the building and garden sector reported a drop of 10,000 positions. Electronics retailers posted a decline of 5,000 jobs.
The unusually cold March may have crimped sales and hiring at clothing stores as they tried to switch to warm weather lines, said Scott Hoyt, a retail economist at Moody's Analytics. Similarly, the cold weather likely depressed hiring at home improvement stores.
"You're not out doing the yard work when it's 30 degrees out," said Hoyt.
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The expiring payroll tax holiday and increased taxes on the rich that were part of the end-of-year fiscal cliff deal may also be cutting into retail spending, said Hoyt. The average increase in taxes is expected to be $1,257 a year per tax filer, according to the Tax Policy Center.
Furloughs of government workers slated to take effect as part of the forced budget cuts may also be depressing hiring in the retail sector, said Hoyt. Because the government's jobs numbers are seasonally adjusted to account for swings around the holidays and other regularly occurring events, a lack of hiring can show up as a job loss.
Yet Behravesh noted that, despite the tax increases and government spending cuts, consumer spending has remained strong.
Hoyt was also not terribly worried about one month of job losses.
"Yeah, we had a bad month," he said. "But one month isn't all that big of a deal."
