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Restaurants added just 1,600 jobs last month

A bad winter likely chilled job growth and put an end to the strong recent run of industry expansion, says RB’s The Bottom Line.
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February was not a good month for the restaurant industry.

On Friday, new federal data found that the industry added just 1,600 jobs last month—its lowest level in more than a year.

By contrast, the industry added nearly 100,000 jobs over the previous two months. And for the past two years, monthly industry job growth has averaged nearly 21,000.

The weak job growth was almost certainly weather related, as winter’s chill froze much of the economy for that four-week period—and put the industry on hold.

The economy as a whole created just 20,000 more jobs in February, and the unemployment rate declined to 3.8% as the labor force shrunk.

But wages continue to grow, which is good news generally for a restaurant industry that needs people working and earning more money so they will eat out more often. Average hourly earnings rose by 3.4% over the past 12 months.

The other side of that coin, of course, is higher wage growth in the restaurant industry, which is cutting into the profitability of restaurants as they face generally weak overall sales growth. Wage growth in leisure and hospitality industries rose 4.1% over the past 12 months, 70 basis points higher than total wage growth.

Weather does have a major impact on jobs and on sales at restaurants. The industry lost 36,000 jobs in September, for instance, because of hurricanes as locations closed temporarily and left people out of work.

As I wrote yesterday, the polar vortex closed some restaurants late in January and kept many people at home. And early numbers from Black Box Intelligence showed weather to be a problem for much of the country in February, putting an end to a relatively strong run of same-store sales.

But weather is always a temporary issue. I have long felt, for instance, that first-quarter same-store sales data is almost useless in determining any long-term trends in the industry because weather is such a noisemaker in January and February. But over time spring tends to bring recovery.

The same is true with jobs numbers. The hurricane-influenced, 37,000 job decline in September was followed by a 57,000 job increase in October.

And the industry has been adding jobs at a faster-than-normal rate. Each of the past three months featured job growth at least double the rate of the past two years. A break was due, probably.

 

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