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The 2015 Forecast for Retail Looks Mostly Sunny

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The numbers indicate that 2014 was the best year for increased employment since 1999 and retailers had a hand in fueling that growth.

According the U.S. Bureau of Labor Statistics, there were 252,000 additional jobs in all fields in December, which edged the unemployment rate down to 5.9%. The report also showed that retailers added 7,700 jobs in December and during the course of 2014, the industry added 250,000 jobs, bringing the December employment level to 15.5 million. And it isn’t supposed to stop there. Retailers are expected to benefit from stronger hiring as consumers’ purse strings loosen.

“Today’s jobs report was very strong and shows that the labor market is maturing and the economy is performing soundly,” Jack Kleinhenz, chief economist of the National Retail Federation, said in a statement. “It is the largest annual increase in overall employment since 1999.”

Retail employment for 2014 climbed by 176,000 jobs over the year before, according to NRF’s calculations, which do not include automobile dealerships, gasoline stations or restaurants.

Along with increased hiring by Retail, consumer spending is also expected to rise. But some retailers are hesitant to adopt this good news so quickly. A year ago, economists predicted a better 2014 than was really experienced. The circumstances that clouded the economy were a very severe winter and a big build up of inventory. Those factors influenced the rest of the year.

An unexpected spike in interest rates during summer put a damper on the housing recovery, not only in terms of direct sales, but also employment.

Regardless, consumers appear to be feeling better about the economy. Senior Director of Consumer Economics for Moody’s, Scott Hoyt, says, “Core retail sales should increase 6% in 2015, which is a significant increase from the 3.9% rate that 2014 is expected to reflect, when all the numbers are in.”

That means consumers are returning to stores and retailers should reap that benefit in 2015. The rise in employment should reflect income growth. Shoppers are reporting a greater confidence level, as conditions continue to improve and as the unemployment rate comes down. Indeed, Moody’s expects the unemployment rate to go down 5.7% by the end of 2015.

Retail sectors poised for success this are Dollar stores, which thrived during the recession, and have been one of the fastest growing retail formats, and they’re expected to have another promising year. With such low gas prices, their lower income customers tend to be most affected by having a few extra dollars to spend. Dollar General, the nation's largest dollar chain, plans to open 730 new stores this year, up from 700 opened in fiscal 2014. Dollar Tree, the second largest chain, opened 300 stores during the 39 weeks ended Nov. 1.

The Luxury sector saw 5% growth in 2014, fueled by consistent store openings in smaller cities, and growing tourism. Americas have become a key growth driver of global luxury sales as the broader luxury market slows because of events in Asia, Europe and Russia, and this sector anticipates steady growth.

Mass Merchandise should experience solid growth also, as urban neighborhood formats gain popularity. These neighborhood stores also put more emphasis on and sell more fresh food than the retailer's traditional big boxes, and that is very attractive to an urban population.

With a new CEO, Target is expected to regain its footing after a huge data breach in 2013 and focusing back on stylish apparel and home goods.

Despite a 2.1% decline in sales, Department Stores continue to re-invent themselves in order to attract young shoppers. Even though Macy’s is closing some stores, it is restructuring its merchandising and marketing functions so one unified operation would support in-store and online buying. The chain is also investing heavily in mobile technology.

TAGS: retail trends, retail, retailers,
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