The retail apocalypse has led to a flurry of retail store closures and bankruptcies. Retail trade employment has dropped by 65,000 in the last 12 months, and stores which compete with online retailers are experiencing sizeable declines in employment. That's impacting some corners of the subprime loan market, and could leave the economy vulnerable. The retail apocalypse is real. Hundreds of stores across the US have closed, as the rise of ecommerce and a surplus of mall space have combined to bring multiple retailers to their knees.
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The retail apocalypse is killing jobs, and it's left 'the economy vulnerable to an adverse shock'
The retail apocalypse is real. Hundreds of stores across the US have closed, as the rise of ecommerce and a surplus of mall space have combined to bring multiple retailers to their knees.
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And in a big research report out November 13, UBS economist Seth Carpenter and his team undertook a deep dive on the impact of these retail struggles on the broader economy. The takeaway: retail job losses are accelerating, consumer delinquencies are spiking in certain corners of the market, and while this doesn't likely pose a risk to the financial system, it could "
"In the 12-months ending in October, the US economyadded roughly 162k jobs per month, a pace almost 40k below the average pacefor most of the expansion," UBS notes. "Almost all of this slowing in employment growth over the past year is from retailemployment."
For example, retail trade employment added 25,000 jobs per month on average for much of the expansion, but by early 2017, the category reversed and has shed 65,000 jobs in the past 12 months. And the rise of ecommerce is at least partly to blame, according to UBS.
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ccording to new research from the New York Federal Reserve, the delinquency rate for subprime loans originated by auto finance companies is spiking, for example. And there has been a spike in mobile home delinquencies too, according to UBS.
The question then is: how big of a risk is this for the broader economy?
UBS notes that disruption happens. Manufacturing, for example, shed 5 million jobs between 2000 and 2015, but many of those individuals found work in other sectors, including retail. UBS expects the economy to withstand the disruption brought about by the rise of ecommerce and the struggles of traditional brick-and-mortar. And in the long run, a shift from stores to lower cost, labor-light online sales could be positive for the economy.
"That said, transitions are hard and rapid transitions can lead to temporary economic dislocations," UBS said.
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