The influx of seasonal retail jobs and greater turnover rates for part-timers in the consumer sector reveals potential strength in retail-related stocks and exchange traded funds going into the holiday season.
So far this year, the retail space has been underperforming the broader market. For instance, the SPDR S&P Retail ETF (NYSEArca: XRT) has declined 0.4% year-to-date, whereas the S&P 500 index rose 9.7% so far this year. [Retail ETFs Take It In The Shorts]
However, the pre-holiday season ramp up may signal strength ahead. After falling to 51% following the recession in 2011, median turnover rates for part-time retail workers have increased to 74.9% in 2013, reports Krystina Gustafson for CNBC.
Additionally, the Bureau of Labor Statics reveals that the rate at which people are quitting rose to 2.9% for July, compared to 2.3% for the same period last year.
According to Hay Group, voluntary turnover among retail workers is a positive sign for the economy, reflecting the improved jobs market where unsatisfied employees are confident in their ability to find another position at another store.
“Everything we see indicates the economy is slowly improving,” Craig Rowley, vice president at Hay Group, said in the article.
Moreover, in an attempt to entice proficient workers, some retailers have increased wages, which suggests it may be an employee’s market.
Challenger, Gray & Christmas Inc. expects retailers’ seasonal hiring levels could hit 800,000 for the first time since the dotcom boom while the Hay Group calculates that 24% of companies plan to hire more full-time staff in 2014, compared to 13% last year.
The retail workforce build-up ahead of the holiday season potentially indicate that retailers are more optimistic over the expanding economy and consumers’ potential spending power this year.
Along with XRT, the largest retail-sector ETF in the space, investors can take a look at other options, including the Market Vectors Retail ETF (NYSEArca: RTH) and PowerShares Dynamic Retail Portfolio (NYSEArca: PMR).
RTH only targets the 25 largest U.S.-listed public traded retail companies, with a heavy position in Wal-Mart (NYSE: WMT) 10.2%, Amazon (NasdaqGS: AMZN) 9.4% and Home Depot (NYSE: HD) 8.0%. In comparison, XRT includes a broader range of 102 holdings and equally weights its positions. RTH is up 4.1% year-to-date. [Retail ETFs Look to Recapture Lost Magic]
Additionally, PMR tracks a so-called smart-beta or fundamental index that selects companies based on factors like price momentum, earnings momentum, quality, management action, and value. PMR is down 2.7% year-to-date.
SPDR S&P Retail ETF
For more information on the retail sector, visit our retail category.