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Retailers expected to take hard hit

SPRING HILL — Every day Robin Street goes to work at Linens 'n Things, she is surrounded by the reality of her future.

Plastered everywhere, big and small, red and yellow, the signs scream: "Going Out of Business Sale."

They serve as beacons to bargain shoppers. But to Street, who has spent 30 years in the retail field, they signal something much different: impending unemployment.

"I'm not sure what's next," the 51-year-old Spring Hill resident said earlier this week. "No one is hiring. It's bad in Hernando County."

Street's situation is only expected to spread as the threatening recession claims its latest victim, the retail industry.

Even with epic deals expected for Friday — one of the biggest shopping days of the year — major retailers are anticipating less than stellar sales.

A faltering retail economy is news of particular alarm to Hernando County, where retail trade is the largest occupation and hard times are already taking a toll.

"We are not immune to some of the things we are seeing," said Michael McHugh, the county's economic development director. "We are a service-driven economy."

The county is still suffering from a debilitating blow caused by the downturn in the construction industry, which has left thousands jobless, forced companies into bankruptcy and ended a much-hyped growth spurt.

And now, though previously unimaginable, economic experts are warning that a prolonged slide in retail trade could prove worse.

Based on economic forecasts and retail's prominence here, University of Florida economist David Denslow said it is likely "more jobs will be lost in retail than in the construction (bust)."

Melissa Neal described this economic storm when she studied Hernando's employment data earlier this year.

"Many of the largest occupations in Hernando County — those with the most number of jobs — are in industries that are especially suffering right now," said Neal, the associate director of the Haas Center for Business Research and Economic Development at the University of West Florida.

"Retail sales in the state aren't doing as well as we would like, real estate sales are down, and industries that depend on tourism, such as restaurants and property management firms, are beginning to feel the pressure of the tightening economy."

The looming retail crisis earned attention earlier this month when the nation's major retailers reported that annual sales fell more than 10 percent, with some seeing a drop of more than 20 percent.

At the local level, it means that fewer big-box chain stores, like those dominant on State Road 50 and U.S. 19, are hiring, and some will likely close.

"The one cost retailers can control is labor costs," explained David Hamilton, a management consultant with the Pasco-Hernando Workforce Board. "I am not seeing a lot of retailers add staff for the holiday."

The major retailers made their sales announcement a day before the federal government released the latest unemployment numbers.

Hernando County's jobless rate climbed to 9.7 percent in October, fifth-highest in the state.

The nearly 1,000 new unemployment claims in Hernando pushed the rate to a 15-year high, according to the Florida Agency for Workforce Innovation.

This time last year, unemployment stood at 6 percent, and the county ranked eighth highest in Florida.

Hamilton said the numbers indicate the economic troubles are spreading beyond the housing industry.

Statewide, retail trade fell 3 percent in October 2008 compared to October 2007, down about 29,000 jobs.

Economic experts don't believe those October numbers include the recent bad news for the retail industry. So the number of retail jobs lost could increase and certainly won't improve.

• • •

In the long term, state economic forecasters still project that retail sales will represent the fasting-growing occupation in Hernando, though the latest estimates express more caution.

In 2007, the state's labor market statistics division projected 23 percent growth through 2015. But the most recent figures suggest 2 percent annual growth through 2016.

These next few months will determine whether those projections are probable.

The big question, economists believe, is how long the retail slump will last.

Retailers typically reach profitability Friday — hence the reference to what's known in the industry as "Black Friday." But at this point, many stores are just trying to weather the storm.

"It's going to be a rough holiday season," said Denslow, who also serves as an economist for the UF's Bureau of Economic and Business Research. "I think we'll see the Florida economy heading down through the first half of 2009."

He suggests most retailers will try to stay alive through the holidays to reach profitability. If they can't, expect to see a number of businesses closing in February and March, he said.

At the local Career Central job counseling center, Hamilton said he isn't seeing an usually large number of former retail employees looking for work. But like Denslow, he said that could change quickly.

"If companies stay in business, there won't be much of a change" in the number of retail jobs in the county, he said. "If companies go out of business, you see a major impact on the sector. That's what happened with construction."

• • •

A downturn in the economy hurts the working poor the most. Low-skilled workers, whether retail or construction, dominate the local economy.

In Hernando, retail employs nearly one in every five, or 17.6 percent, of the workforce, according to the latest numbers. That doesn't even include cashiers, another occupation in the county's top five.

"It's a function of population growth," said McHugh, the local economic director. "There is a very symbiotic relationship of home building, growth and the retail sector."

Neal, the associate director at the Haas Center, said a fundamental problem with the county's economic foundation is the unskilled workforce. It leads to overexposure in times of economic peril.

The most popular jobs also pay the least in comparison to other sectors, state figures show. Retail sales jobs in Hernando, for instance, pay an average of $8.26 an hour.

One cure, Neal suggests, is education.

"That is the critical piece necessary to diversify the economy of the state and Hernando County in order to ease the effect of economic downturns in construction and tourism when they hit," she said.

That, of course, takes systemic change. It won't help those looking for jobs, such as Street.

She started at Linens 'n Things six months ago, and recent attempts to find a more stable job went nowhere.

This summer, she stood in a line of hundreds for a job at the new Kohl's department store that opened on Spring Hill Drive. But after waiting for an hour and a half, store hiring staffers announced that all jobs were filled, she said.

Now Street is soliciting applications, but finding no luck.

"I go in and ask for an application, and when I do they say they are not hiring," she said.

It's unclear when her current employer will shut the doors for good, but the prospect of unemployment is near. Street physically shivered at the thought of it.

"I'm kind of nervous," she said. "I've never done it before."

John Frank can be reached at [email protected] or (352) 754-6114.

Retailers expected to take hard hit 11/26/08 [Last modified: Thursday, November 27, 2008 1:07pm]
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