Retailers' Holiday Season Concerns Soothed by Job Gains

NEW YORK – Retailers, facing what many experts view as a difficult holiday season, received a glimmer of hope Friday after the government reported a jump in October jobs creation.

About 337,000 new jobs were added to U.S. non-farm payrolls in October, double the amount Wall Street economists had expected.

The news helped soothe jitters that consumers, on their guard because of a lackluster labor market, rising oil prices and geopolitical turmoil, might keep a tight grip on their wallets and spoil what is for many retailers the most important shopping season of the year.

"It's an indication of consumer sentiment. If people have more jobs, then they're more confident and willing to spend," said Marsha Jong, specialty retail analyst at Sanders Morris Harris (search), said. "It's a good signal for the holiday season."

Employment growth sped along at its fastest pace in seven months in October, and the number of jobs created in the two prior months was also revised higher, according to the government's report.

Consumers' confidence in the labor market and the economic environment is viewed as key to spurring their spending, which drives two-thirds of U.S. economic growth, analysts said.

For apparel retailers, though, those are not the only factors driving sales, said Howard Tubin, retail analyst at Cathay Financial LLC (search).

"As long as things aren't terrible for the consumer, people, and women in particular, will respond to the fashion and newness that's out there," Tubin said. "Its the fashion that really drives the business almost despite what's going on the macro environment."

"If people are more confident in their jobs, that certainly helps," he added.

Retail sales in October were generally better than Wall Street analysts had anticipated as cooler weather helped boost demand for winter items like sweaters and outerwear.

Many retail experts had feared the deep markdowns at stores during the month would result in soggy sales, but that did not come to pass. October sales were up 5.5 percent on average, well above Wall Street's average forecast of 2.9 percent, according to Bernstein Research (search).

Still, retailers are not necessarily in the clear for the holiday season, as persistently high energy costs continue to take a bite out of consumers' budgets and strong November and December sales last year make for difficult comparisons, analysts said.

"The consumer still faces headwinds, including anemic wage growth and employment gains," Bernstein Research retail reporter Emme Kozloff wrote in a research note.

"This, coupled with the upcoming pressure of higher home heating bills this winter and still-high year-over-year gas prices, will put pressure on the wallets of consumers."

The Standard & Poor's retail index (search) rose 1.1 percent on Friday.