When it comes to job creation in the United States, President Trump will be displeased to hear the latest findings from Quartz: 170,000 fewer retail jobs in 2017 – and 75,000 more Amazon robots.
In November, we explained that while everyone likes to point the finger at Amazon, America’s retail apocalypse can’t be tied to just one catalyst (see: A Look At America’s Retail Apocalypse In Charts), however, fierce competition in the industry has induced an army of robots at Amazon’s fulfillment centers, which has certainly led to the termination of retail employees across the industry.
At the end of 2016, Amazon was the eighth-largest private employer in the United States with a headcount growing by 40% year-over-year. So basically, as Amazon’s robots helped to disrupt the overall retail industry, the excess of cheap retail labor is now flocking to Amazon.
We must point out the majority of positions being added are jobs not careers inundated in wage stagnation.
The article notes, Amazon’s growth has to come at some cost, because there is no free-lunch here..
Does Amazon create more jobs than it destroys?
The analysis below from Quartz’s staff provides the shocking realization that retail job-loss in 2017 is the first annual decline since 2009. Even though Amazon is hiring at a fast clip, it won’t be enough to cover the losses in the rest of the industry. All the while, amazon added 55,000 robots this year as the trend in robot additions is now parabolic…
Assuming the current industry trends continue through the end of the year, the number of employees in Amazon-related retail (that is, retail that Amazon competes with, such as book stores, as opposed to areas it doesn’t compete with, like gas stations) will decline by about 1% year-over-year. While that’s a small percentage, the number of job losses would be 170,000. That would be the first annual decline since 2009.
Amazon’s employment increases won’t be enough to cover the losses in the rest of the industry. We have assumed Amazon will maintain its current year-over-year headcount growth rate and will add 146,000 employees worldwide in 2017, a 43% increase (excluding Whole Foods employees). Even with that aggressive growth assumption, and including Amazon employees worldwide, the combined employment at Amazon and Amazon-related retail would still decline by 24,000.
Amazon has already added 55,000 robots this year and its growth rate is accelerating. The company stated it had 45,000 robots at the end of 2016, added 35,000 robots by the end of the first half of 2017, and then another 20,000 in the third quarter. We’ve assumed another 20,000 in the fourth quarter for a total of 75,000 new robots in 2017. While it may be difficult to prove causality, it’s not difficult to see the correlation between a decline of 24,000 human employees and an increase of 75,000 robot employees.
Change in employees and robots at Amazon and Amazon-related retail
Amazon’s growth and efficiency (driven by AI and automation) is a key factor in stock performance verse S&P Retail Index. We must also add, the Swiss National Bank (SNB) has been a larger buyer of the stock igniting momentum to the upside. The article notes, the company is increasing robotics investment, and in their assumption— machines could represent at-least 20% of the total employee base by EOY. Employees within Amazon should be concerned about this startling trend, because even they are not safe.
Quartz further said,
The National Retail Federation (NRF) has forecast that retail-industry sales will grow by around 4% in 2017. (US Census Bureau data also confirms that growth rate through the first nine months of the year.) Online shopping is growing even faster—at 10% so far this year.
Amazon’s US business represents 35% of that growth. And Wall Street analysts estimate that the company will represent 51% of all US online sales growth by the end of the year.
In the grand scheme of things, Amazon represents 20% of the entire US retail industry growth in 2017- even though it only represents 3% total retail sales. As explained in the beginning, there are many catalyst contributing to retail’s demise, but it appears Amazon is ushering in a new normal with robots overtaking retail jobs in contradiction to President Trump’s glorious statements about explosive job growth.
For the time being, retail employees who have been laid off will get another taste of reality, when they drown their sorrows at the local strip joint.
Get used to it, this is the new normal.