Job Growth in U.S. Restaurants and Bars Slowed Significantly in February

Months of historic levels of job growth tapered off significantly in February, according to the latest economic report released by the U.S. Bureau of Labor Statistics. In restaurants and bars, there were just 1,600 jobs added this month, compared to 36,600 jobs added in January and 40,000 jobs added last December. Overall, there were 20,000 jobs added to the entire U.S. labor force in February, a stark drop from the estimated 172,000 jobs that analysts were expecting to see added, according to MarketWatch.

“One poor report should not set off alarm bells, but given that the labor market is the linchpin for the entire economy, it does add to existing concerns and raises the stakes for next month’s report,” Curt Long, chief economist at National Association of Federally-Insured Credit Unions, told MarketWatch.

Labor Pressures

Restaurants in the U.S. have been grappling with the effects of the rising minimum wage in many cities across the country, as well as extremely high rates of turnover and record low levels of unemployment. The rate of unemployment in the U.S. currently sits at 3.8 percent, or about 6 million people unemployed, down slightly from 4 percent in January.

R.J. Melman, the president of the Chicago-based restaurant group Lettuce Entertain You, told Skift Table in an interview in February that the company has been increasingly struggling to fill open positions across its restaurant portfolio. In 2009, Lettuce Entertain You received 1,000 applications for staff openings at a new restaurant in Los Angeles. Now, the company might receive five or six applications for new job openings.

And then, there’s the additional issue of figuring out how to keep the hires that operators are able to secure.

“Keeping restaurants fully staffed remains one of the biggest concerns for restaurant operators,” market research firm TDn2K stated in its most recently monthly report on the state of the industry. “While they constantly state that finding enough qualified employees is a problem, poor employee retention may be the toughest challenge.”

The Rising Minimum Wage

At the beginning of the year, the minimum wage rose in 18 states, and four more states will raise wages by the end of the year. Further minimum wage increases continue to take place at city jurisdiction levels, and the proposed Raise the Wage Act, a piece of federal legislation that aims to raise the minimum wage to $15 for all states and eliminate the tipped minimum wage across the country, is currently making its way through Congress.

These minimum wage hikes, along with other new worker benefit laws being pushed through at city and state levels, could arguably help counteract the retention issues that operators are seeing. Restaurant employees will increasingly be paid higher wages and offered more benefits like paid vacation leave, paid parental leave, and more regulated scheduling practices.

The wage increases and added benefits put more pressure on labor costs, however, which in turn pushes operators to figure out how to do more with less staff. This could have contributed to the decreased job growth numbers that the Bureau of Labor Statistics reported this month.

The National Restaurant Association (NRA) has come out strongly opposed to the proposed Raise the Wage Act, which it says is “harmful to both businesses and employees.”

“A dramatic rise in labor costs could force restaurant owners and operators to raise menu prices, cut back on current employees’ hours, and/or eliminate positions,” the trade organization stated in its official position on the legislation.

But the reality is many operators are already paying their employees $15 an hour or above (including tips where applicable). According to the Bureau of Labor Statistics, employees in the leisure and hospitality category, which includes restaurants and bars, are earning $16.39 per hour on average, and taking home approximately $426.14 per week.

Gwyneth Bordon, the executive director of the Golden Gate Restaurant Association in San Francisco, said in an interview on Thursday that it was disappointing to see the NRA funnel time and effort into opposing legislation that is a mute point in the area that she represents. San Francisco operates on a $15 minimum wage, doesn’t allow for a tip credit, and mandates that employers have to provide paid sick leave and paid parental leave for hourly employees, among other benefits.

“The legislation helps to professionalize the industry, and gives workers a better sense of job and life security,” Bordon said of the labor mandates currently in practice in San Francisco.

But, she acknowledged, the current restaurant business model doesn’t allow for much flexibility in paying for the labor regulations that are being proposed at all levels of government.

“The consumer doesn’t realize what it costs,” Bordon said. “The question now becomes: ‘How do we shift the national conversation around this?'”