There has been some hope that with a modest recovery from the recession that holiday retail sales would pick up this year. Those hopes appear to be premature. The high levels of unemployment and lack of consumer access to credit may make this Christmas season even worse than last.

The difficulties in the retail sector are going to hurt the jobs market, particularly between now and the end of the year.

New information from human resources firm Hay Group, “Nearly half the nation’s 25 biggest chains expect to hire fewer holiday workers this season than they did last year.” Hay says this is worse than the outlook it found a year ago in a similar survey.

The news is probably particularly bad for mid-tier retailers like Best Buy (BBY), Macy’s (M), Sears (SHLD), Nordstrom (JWN), and Gap (GPS) which have struggled with poor same-store sales for more than a year.

The news points to the effects of a “jobless” recovery and the fact that it may be short-lived. Retail sales make up a significant part of GDP especially in the fourth quarter when many chains book as much as 40% of their sales. More layoffs and less hiring in the sector means greater unemployment which could hobble the recovery as it moves into the early stages of 2010.

Holiday retail activity may not be the perfect canary in the coal mine, but it is close. GDP can only move up for so long without consumer participation. The US manufacturing economy and the exports its produces are not strong enough to overcome the consumer’s reluctance to take money from his mattress.

The recession may not be over.

Douglas A. McIntyre

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