The U.S. economy entered its fifth year of expansion in November, with non-farm payroll employment, a broad economic indicator, having expanded by 4.5 million jobs (3.4 percent) since bottoming in May 2003. Wal-Mart, meanwhile, the nation’s largest private employer, has been creating new jobs at a much higher rate. Data obtained from Wal-Mart show the retail giant expanding employment by 15 percent in the same two-and-a-half-year period.
That’s only part of the incredible success story being told by the Arkansas-based retailer. The Wal-Mart employment effect, rarely examined by economists, is so strong that it is counter-cyclical. In other words, the retailer has created new jobs in every recession since it went public in 1971, according to annual reports and monthly employment data. Few publicly traded companies can make such a claim.
Aggregate payroll employment grows in expansions and declines in contractions. For example, employment during the 2001 recession, following the postwar pattern, declined nationwide by 1.6 million jobs (1.2 percent). These job losses were concentrated in goods-producing industry sectors (e.g., manufacturing, construction, natural resources, mining) dominated by industrial firms that lay off workers in periods of recession.
Wal-Mart, by contrast, expanded its U.S. workforce by nearly 110,000, or 12 percent, during the eight-month 2001 recession. This employment effect was so powerful that the Fayetteville-Springdale-Rogers section of northwest Arkansas was one of only a handful of nationwide metropolitan statistical areas (MSAs) to record net job growth in the 2001 recession, according to U.S. Bureau of Labor Statistics data. Wal-Mart’s corporate headquarters and many of the firm’s suppliers are situated in this Arkansas MSA.
Wal-Mart’s long-term employment chart shows an upward trend overall, with the low-cost retailer growing from 2,300 employees in 1971 to 1.5 million in early 2005, according to annual reports. But the company has shown a unique ability to grow its jobs base while the nation as a whole has struggled. According to the National Bureau of Economic Research in Cambridge, Mass., recessions occurred in 1973-75, 1980, 1981-82, and 1990-91. Now view Wal-Mart’s jobs performance across these periods: There were 3,500 Wal-Mart employees in fiscal year 1973, 4,400 in 1974, 5,900 in 1975, 7,500 in 1976, 21,000 in 1980, 27,000 in 1981, 41,000 in 1982, 46,000 in 1983, 275,000 in 1990, and 328,000 in 1991.
Wal-Mart employment covers service-producing industry sectors such as retail trade, transportation and warehousing, and professional and business services, and it’s important to point out that new jobs created in these sectors have reduced the cyclical volatility of employment declines in recent recessions. Aggregate payroll employment fell 1.1 percent in 1990-91 and 1.2 percent in 2001 versus a larger average decline in ten postwar recessions. Goods-producing employment contracted 3 percent in 1990-91 and 4.9 percent in 2001. However, services fell only 0.3 percent in 1990-91 and 0.4 percent in 2001.
It’s not known whether or not Wal-Mart’s employment practices have contributed to this reduction in business fluctuation as the U.S. evolves from a goods-producing economy to a services-producing one. But this point is clear: A corporation that adds new jobs in periods of recession, while many others are laying off workers, is good for the U.S. economy.
–Greg Kaza is executive director of the Arkansas Policy Foundation, an economic research organization based in Little Rock.