With the holiday season approaching, many Idahoans wonder what recent trends in retail might impact spending and employment this year. Historically, retail has been an enormous revenue source for the U.S. economy.
In 2023, retail sales made up 5.9% of U.S. gross domestic product (GDP) [5]. The National Retail Federation (NRF) predicts holiday retail sales for the U.S. will increase between 2.5% and 3.5% or about $979 to $989 billion. The importance of holiday purchases for Idaho, cannot be understated as retail accounted for 8% of its gross regional product at $9 billion according to Lightcast data.
For Idaho and the U.S., there is a close relationship between inflation and sales, both of which have slowed down. Notably, recent trends indicate a slowdown in employment within the retail sector. A detailed examination of sales reveals these interconnections.
Holiday employment
Figure 1 – Idaho quarterly employment
Retail hiring for the holiday season is evident from employment data shown in Figure 1. For Idaho, there has been a consistent increase in employment every fourth quarter, which spans between October to December. This employment cycle historically led to a net increase of employment in Idaho for most of the decade. Peak growth was substantial immediately after the pandemic, with 2020 employment growth at 2.7%, and 2021 increasing 3.8%. However, in 2022, the trend shifted, resulting in a net decline of employment due to layoffs, as illustrated in Figure 2. From 2022 to 2023, holiday employment continued this decline by 0.4%.
This change began in 2022 with a decrease in the rate of inflation following Federal Reserve interventions. A portion of this stagnation in employment levels might be a component of the end of the period of runaway inflation. It will take an analysis of sales to flesh out this association.
Figure 2 – Idaho retail buildup
Holiday sales
Figure 3 – Idaho retail sales
Idaho’s retail sales data aligns with recent employment cooling as observed in Figure 1. There was a dip in sales the quarter following the start of the COVID-19 pandemic, compared with the previous year with annual sales down by 2.3%. This was followed by a massive increase in sales in 2021, that was highly correlated with inflation. This growth was 27.2% higher than 2020 sales. 2022 and 2023 saw 10.5% and 3.3% increases in sales, where 2024 shows further tapering off with Idaho retail growth in quarter two, being reduced to 0.1%.
While overall retail performance is heavily influenced by inflation, the range of growth and the decline of individual types of retailers still tells an interesting story. Looking at a breakdown in Figure 7, we can see that the movement of the various types of retailers aren’t necessarily related.
A standout is the recorded sales of gasoline stations, which closely resembles petroleum prices showing a huge decline during the pandemic and an increase with the war in Ukraine in 2022. With this data being in year over year increases, it is a little bit more difficult to glean the inherent seasonality of retail. What this data does show, is relative performance.
Idaho retail sales highlights
- During the 2019 quarter four holiday season, all retail categories experienced sales growth, while 2020 presented a mixed picture. The pandemic holiday season was fruitful in Idaho for garden supplies dealers with a 21% increase, miscellaneous retailers with a 13% increase and hobby shops at 12%. These percentages are perhaps because of the increased pursuit of hobbies during the lockdown, however, the state also saw a 15% decline in electronic sales due to chip shortages as well as a decline in general merchandise stores at 11%, gas stations at 11% and clothing stores at 9%.
- 2021 saw extraordinary sales growth across all sectors of retail with Idaho sales in quarter three beating out the holiday season sales during quarter four. Miscellaneous sales — encompassing things like mobile home sales, pet stores, used goods and art dealers — saw remarkable growth increasing by 44% in quarter three and 44% again in quarter four. Clothing stores also saw a 34% increase in sales during the 2021 holiday season. This, again, coincides less with some kind of economic boom and is more closely associated with the rapid increase in the rate of inflation.
- There was a lot of growth in 2022 but, for the most part, less than the previous year. Gardening suppliers and general merchandise stores both increased by 15%. This also includes warehouse clubs and department stores, which experienced the highest gross in holiday sales at 17%.
- Finally, the latest data for 2023 shows sales declining to more typical pre-pandemic growth levels amid decreasing inflation rates. Clothing stores and health care stores, like pharmacies, saw the highest growth at 16% and 12%. Furniture stores and gasoline stations saw a modest decline in sales by about 6%.
Figure 3 and Figure 4 illustrate a significant expansion of sales in all retail sectors following post pandemic inflation. There was also a subsequent slowdown in sales as this inflation began to subside in 2022. During this time, growth was highest among miscellaneous, clothing, hobby and garden retailers while sales growth of food retailers, like grocers, was close to average. This sales growth may only support the modest employment increase, as shown in the employment data in Figure 1.
Generally, miscellaneous, clothing, hobby and garden retailers have lower employment levels as visible in Figure 8. Combined, these industries accounted for only 27% of retail employment in quarter four in 2019, compared to general stores and food retailers, which employed 39% of the retail workforce in Idaho. As a result, the rising sales in smaller retail sectors are unlikely to lead to a significant surge in overall retail employment in Idaho. Without a surge in sales, retailers in Idaho may need to reassess their labor force, potentially leading to further reductions in employment, as observed prior years in Figures 1 and 2, at least in the short term.
Figure 4 – Idaho retail breakdown
Figure 5 – Idaho retail highlights
Who’s buying?
Figure 6 – U.S. retail breakdown by income
The apparent increase in sales, though slowing, raises some questions. With the extreme level of inflation that followed the 2020 COVID-19 pandemic — that continues to weigh heavily on consumers — retail sales growth would be expected to be worse based on instinct. This would be shown especially in nonnecessity items such as hobby items and clothing as the population reduces discretionary spending. Instead, growth in these sectors of retail outpaced necessities like food stores and general stores. Was it due to the pandemic-era government stimulus checks many people received in 2020 and 2021? While specific data for this is unavailable for Idaho, a recent paper from the Federal Reserve aimed to shed light on this national trend.
Researchers at the Federal Reserve found that spending was relatively similar across all income groups prior to the pandemic. This trend continued until the first stimulus checks were released. What followed was a large but brief 22.3% increase in low-income spending as the money was quickly depleted, this is shown in Figure 6. Retail spending was once again close across all income levels until the middle of 2021. During the period between 2021 and 2023, low-income retail spending was reduced while high-income spending increased rapidly.
By the middle of August 2024, inflation adjusted retail spending of low-income households increased by 7.9% from January 2018. High-income households increased their spending by 16.7% and medium-income households increased their spending by 13.3% [1].
This article by the Federal Reserve highlights the emerging trend of increasing influence of high and middle-income consumers on retail sales on the national scale. This would also explain the observed increase in Idaho clothing sales, hobby stores, motor vehicles and garden suppliers. The composition of retail sales is shifting favorably for the discretionary spending of high-income Idahoans.
While high-income sales have been increasing, low-income retail sales have only recently started to increase since 2023. As the rate of inflation continues to slow, this will bring much needed relief in the coming holiday season. Improving the purchasing power of low and middle-income Idahoans will also likely be essential to improving sales and bolstering employment across all sectors of retail.
Conclusion
Despite slowing inflation, Idaho retail employment has begun to flatten, sales growth has been slowing and the proportion of national sales has been increasingly skewed to discretionary spending. However, spending of middle-class and low-income workers has also been increasing recently and inflationary pressures continue to be reduced. The spending of high-income Idahoans may have just saved retail for long enough to see a recovery for the majority of consumers. Likewise, the health of retail would only be improved by such a recovery, as this will be able to support more growth in both seasonal holiday and year-round employment.
Figure 7 – Expanded Idaho retail breakdown
Figure 8 – Idaho retail employment breakdown*
* Note: As of 2022, the employment classifications for miscellaneous and sporting goods, as well as furniture and electronics, have been combined.
Brandon.Duong@labor.idaho.gov, regional economist
Idaho Department of Labor
208-236-6715
Sources:
A Better Way of Understanding the US Consumer: Decomposing Retail Spending by Household Income [1]
Shoppers Spend More Freely Than Expected, Sign of Solid U.S. Economy [2]
Steady Sales Growth Expected for 2024 Holiday Season, According to NRF [3]
United States Census Bureau Monthly State Retail Sales [4]
Wholesale and Retail Trade Industries Labor Productivity [5]
This Idaho Department of Labor project is funded by the U.S. Department of Labor for SFY25 as part of the Workforce Information grant (40%) and state/nonfederal (60%) totaling $885,703.
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