“Almost no one wants to admit the genius of Jeff Bezos and Amazon. Apparently, many have failed to see that Amazon has become the world's biggest retail company.” Hubert Burda
Consumer spending makes up around 68 percent of the nation’s gross domestic product. Consumer spending is individuals and families purchasing groceries, clothing, recreation, stocks, insurance, education and much more. The transactions cover a broad swath of economic activity.
Much of the nation’s consumer spending is captured via retail trade. A useful retail trade definition is “the re-sale (sale without transformation) of new and used goods to the general public, for personal or household consumption or utilization.” Not all consumer spending is captured through retail trade transactions, but a large share is.
Broad-category examples of retail trade sectors are motor vehicle sales, furniture stores, electronic stores, building material stores, grocery stores, pharmacies, gas stations, clothing stores and department stores, among others. Then there is the relatively new and emerging part of the retail trade sphere—non-store retailers. These are establishments that sell products on the internet. Examples include Amazon, Zappos, Overstock.com, or eBay. These types of retailers have grown rapidly in the past 15 years and their presence is reshaping the retail trade landscape.
Whereas in the past nearly all retail transactions were done through traditional brick-and-mortar stores, now a significant and growing segment is diverted to internet sales. The consumer shops online and goods are delivered to the customer’s doorstep. One can see that the number of brick-and-mortar stores and the level of local sales across the country are being endangered by this economic evolution.
The brick-and-mortar reduction is beginning to show its economic presence in the United States employment numbers. While the U.S. economy is finally expanding at a healthy pace this side of the Great Recession, one of the few industries not rising with this tide is retail trade. While overall retail sales are increasing, employment is not. Traditionally, as a population increases, retail trade employment grows simultaneously, since population growth and consumer spending volume is an integrated dynamic. If studied deeply, a certain ratio of retail trade employment growth spawned from population growth would emerge. Before the internet, the vast majority of all consumer sales occurred in the immediate community or region. But now, the internet is diverting these sales away from the local community — and with internet sales growing, its market share will increase.
We do not yet know how much brick-and-mortar erosion will eventually occur. And will such a phenomenon hit some areas more than others (such as urban vs. rural; or local vs. tourist spending)? These are touch points that economist will be watching as this internet sales phenomenon continues to grow within the national and Utah economies.
In light of this change, in this quarter’s Local Insights we are profiling retail trade employment throughout Utah’s local regions. This can offer a profile of where retail trade is now in a local economy, and possibly how much of the sector could become vulnerable to the internet-sales phenomenon.
All regions can be viewed through the Local Insights web portal. The following is a retail trade profile for the Central Region:
Just how important is retail trade employment in Central Utah? In 2016, roughly 3,000 Central Utah workers were employed in retail trade representing 14 percent of total nonfarm employment in the region. That’s somewhat higher than the statewide retail average of 12 percent. However, although retail trade employment has ebbed and flowed during boom, recession and recovery, the overall trend remains essentially flat. In fact, Central Utah has not yet regained the retail employment levels of the pre-recession boom. While lackluster population growth is probably the main factor in the sluggish retail sector, perhaps online buying plays a part as well.
Most Central Utah counties experienced strong retail trade employment growth in the booming mid-2000s. However, recession stole most of these gains and Central Utah has struggled to add retail employment even during the recovery. Wayne and Millard counties experienced some of the region’s best retail job expansion in recent years, but have yet to show consistent improvement. They are the only two counties to have regained their pre-recession employment levels. Sanpete County has seen steady improvement in the last three years, but growth rates remained moderate.
Tis the Season
Retail trade employment can be very seasonal in nature. In the Wayne County economy, a strong tourism and recreation component produces a significant seasonal pattern. Employment peaks in the summer months and bottoms out in January or February. Retail trade jobs almost double between trough and peak in Wayne County.
Seasonality is not as pronounced in the remaining Central Utah counties. The two most populated counties (Sanpete and Sevier) do show a moderate increase in retail jobs during the holiday season.
Some counties in Central Utah are more dependent on retail trade employment than others. Statewide, retail trade employment accounts for about 12 percent of total nonfarm jobs. Sevier (16 percent), Millard (15 percent) and Wayne (13 percent) counties all show higher percentages of retail trade employment than the state. Sevier County attracts shoppers from outside the county boundaries. Millard County is relatively far away from more populous shopping areas, and Wayne County’s tourism appears to pump up its retail employment.
Location quotients (LQ) provide another way of looking at the importance of an industry. These ratios compare an area’s industry employment share to that of the nation. A retail trade LQ of 1 indicates the area’s industry employment makes up the same share of employment as that industry does nationwide. A location quotient greater than 1 means the area’s industry has a greater employment share than the United States. Utah’s retail trade location quotient measures just higher than 1. However, Sevier County has a retail trade LQ of nearly 1.5, signifying the distinct importance of retail employment in this county. Millard and Wayne counties also show notable retail trade LQs — both in the range of 1.2. On the other hand, Sanpete County (which is relatively close to Utah County shopping) shows an LQ of roughly 1.
In Sevier and Millard counties, the share of retail trade employment has remained fairly steady over time. However, in Sanpete County, the importance of retail trade jobs has steadily declined since the beginning of the recession. Wayne County’s retail trade industry has taken over a more important role in the labor market, partly due to a change in the industry mix when the county lost its largest employer several years back.
Population per retail worker also provides insights into the retail trade industry’s local importance. Statewide, there are roughly 16 residents per retail trade job. With just under 15 inhabitants per retail sales worker, Sevier County is the only Central Utah county to register a lower number than the state. This lower-than-average figure arises because Sevier County acts as a regional shopping destination for many rural neighbors. With its sparse population, Piute County showed a whopping 78 residents per retail trade worker. Most of the population is apparently doing their primary shopping in nearby Sevier County. In Wayne County, the number of residents per retail job has dropped in recent years as retail employment showed strong gains.
Down to Subsectors
In Central Utah, food and beverage stores dominate subsector employment, accounting for almost 25 percent of retail trade jobs. Gasoline stations and general merchandise store (e.g., Wal-Mart) show the next largest employment portion with 18 percent each. Motor vehicle/parts dealers and building materials/garden dealers also account for 10 percent of more of the retail sales workforce.
The share of Central Utah employment at food and beverage stores (25 percent) measures almost double the statewide share (15 percent). Building/garden supplies dealers and gasoline stations also provide a significantly large retail employment portion in Central Utah than in the state as a whole. On the flip side, specialty stores (e.g., clothing, electronics, furniture, sporting goods) contribute much smaller shares of retail employment in Central Utah than statewide. Non-store retailer employment is also in short supply in Central Utah, suggesting the area’s labor force is not benefitting from online sales.
A Fair Share?
Since 2000, food/beverage stores, gasoline stations and motor vehicle/parts dealers have lost labor market share. In contrast, both general merchandise stores and building material and garden dealers have picked up the employment slack as big-box stores moved into the area.
Retail trade is not known for its excessive wages. In 2016, only leisure/hospitality services showed a lower average monthly wage in Central Utah. Not only are retail trade’s hourly wages lower than average, many jobs are part-time contributing to its lower-than-average standing.
Statewide, the average monthly wage for a retail trade worker measures less than $2,600. Not surprisingly, the average retail trade wage measured even lower in all Central Utah counties. Nevertheless, a wide disparity in wages exists even within the region. In shopping-hub Sevier County, the 2016 average monthly retail trade wage registered nearly $2,100, while in Piute County, the average was a mere $1,200.
The Same, but Different
Retail trade wages also show a notable variety in relationship to the average county wage. Statewide the retail trade industry wage measures 70 percent of average. In the two most populous Central Utah counties, Sanpete (74 percent) and Sevier (73 percent), retail trade wages compare more favorably to the overall county average than in smaller counties. In Wayne and Piute counties, the retail wage measures between 50 and 55 percent of average. Millard County’s figure measures, by far, the lowest at 46 percent. The presence of high-paying utilities jobs in Millard County pushes up the comparative average.
Although the gap between retail trade and total average wages widened statewide between 2001 and 2016, most Central Utah counties showed little change in the relationship between the two wages. This suggests that earnings in other industries are growing at about the same rate as those in retail trade. Piute was the lone exception. Here retail trade wages have improved relative to the average wage since the end of the recession.
Within the retail trade industry in Central Utah, the few jobs at non-store retailers showed the highest average wage followed by motor vehicles/dealers and electronics stores. On the low end of the scale, clothing stores paid the lowest wages.