The number of people employed in retail jobs fell by 23,000 - or 3.1% - in September compared with the same month last year, according to industry data.
Despite the fall, the British Retail Consortium (BRC) report released on Monday showed that there were 1.1% more stores opened last month year-on-year.
The fall in full-time jobs, or their equivalent, was largely confined to the non-food sector, the BRC said.
The growth in store openings was almost entirely driven by grocery retailers.
The BRC said in the report that employment in the three months to September was down by 5,780 full-time jobs, or 0.8%, despite a 2.3% increase in the number of shops.
Stephen Robertson, director general of the BRC, said: "With consumer spending now in recession and retail sales volumes declining, this is the biggest drop in overall retail employment in the two years since we began this survey.
"Redundancy rates are thankfully low but many retailers are not filling every vacancy.
"Uncertainty and fears about Christmas trading may also be leading retailers to delay taking on this year's seasonal staff - with that reluctance compounded by the new agency workers rules.
"Supermarkets' continued expansion into convenience store formats means food retailers are still adding new jobs but even that is slowing," Mr Robertson said.
The report found that just over half of retailers planned to take on staff in the run-up to Christmas, down from 61% last year, while a third said staff levels will be kept the same and 8% feared they would lay people off.
Christina Tolvas-Vincent, head of retail employment at business law firm Bond Pearce, which helped with the report, said: "Retailers are being battered by the same economic conditions that have led to the highest unemployment rate for 17 years.
"Store numbers continue to increase but food retailers are almost entirely responsible for this and curiously the trend for them is towards more full-time job opportunities, with part-timers' hours remaining almost flat.
"That could make things more difficult for those looking for flexible employment," she said.