Many economic discussions – especially those following the Great Recession – have focused on the short-term or immediate economy, particularly in regard to the labor market.
However, longer term issues regarding investments, hiring and other business decisions cannot be lost in our thinking about the economy and its direction. While most of us don’t necessarily think or plan 10 years out, it remains vitally important to economists, retailers, policymakers and the consuming public to think about the future while creating budgets, plans or sales projections.
Fortunately for us, the U.S. Bureau of Labor Statistics provides information about the future with its Employment Outlook report that it issues every two years with a 10-year projection of employment and output.
Since the last BLS report, the economy has notably improved and is now poised for more sustained growth. As the economy expands, long term patterns of growth and industry activity can be more readily observed and the BLS’ estimates and projections become valuable to retailers and others who need to make decisions about the future economy, employment and consumer spending.
So where will the jobs be 10 years from now?
In the coming decade, BLS projects that the “retail trade” sector is expected to increase by more than 1 million jobs to a total of about 16 million jobs by 2022.
In fact, retail is projected to be one of the top three domestic industries for future employment opportunities – behind only construction and health care (see the chart below).
The projected growth in the retail industry – pegged at 0.7 percent annually – reflects the healthier pace of consumer spending at 2.6 percent (higher than the 1.8 percent of the last decade) and a strengthening economic recovery. BLS assumes that the economy will grow by 2.6 percent per year, unemployment will drop to 5.4 percent and productivity gains will increase 2 percent a year (idealistic for sure but feasible).
Demographic Changes Abound
While the retail industry’s jobs increase isn’t as dramatic as those in construction and health care (retail already has a large employment base), the three growth sectors are all inter-related.
As housing and residential construction increases (check out this month’s NRF Monthly Economic Review for more) to accommodate a growing population, construction will continue to gather steam. Increases in new units built and the replacement of old housing should pay dividends to retailers who will help buyers fill those homes – think appliances, furniture and garden supplies.
America’s rapidly aging demographic – baby boomers – are also spurring job growth in medical service fields. An aging population and expanded medical insurance coverage (Obamacare) are factors the BLS incorporated into its projections. Again, retailers – especially those selling health and personal care products – will play a critical role in that demand.
What is readily apparent from a review of the BLS report is the important role demographic changes are making in the economy. While demographics have always played an important role in economic decisions, they are now becoming a centerpiece for discussion.
One of the most dominate changes is that the labor force participation rate among older workers is expected to continue its decline. As the baby boomers (those born between 1946 and 1964) head into their retirement, fewer will be part of the American labor force, lowering the participation rate and slowing labor growth and economic activity.
This demographic change – while anticipated – is especially important for retailers. As an individual ages, purchases change. Retailers should take some time to prepare for these changes and remain ever-vigilant and responsive.