August 2017 US restaurant labor data reveals that not much has changed much in the US, employment-wise, since July — which, by and large, is positive for operators. The news isn’t all good, however. Fewer jobs originated in restaurants and bars in August, for instance. Still, restaurant jobs continue to grow faster than the overall economy, and have every single month over the past seven years.
So far, 2017 US restaurant labor data signals a positive future for restaurant operators. The economy took a break in August, though, with US job growth slowing slightly and the economy adding 156,000 jobs (17% fewer than it did in July). The unemployment rate ticked slightly up, to 4.4% (compared with 4.3% in July). On the other hand, wages continued rising by 2.5% compared to the year prior.
Below, we take a further look at where employment and wages stand as of August 2017, along with how they’ll shape the industry and impact restaurant companies in the months ahead:
The nonfarm payroll report, released each month by the US Bureau of Labor Statistics, is a major tool used to determine the overall health of the economy. The total nonfarm payroll (i.e. any job with the exception of farm work, unincorporated self-employment, the military and intelligence agencies) accounts for approximately 80% of the workers who produce the entire gross domestic product (GDP) of the United States. In August 2017, non-farm payrolls in the US totaled 146,730,000 (1.4% above July 2016), growing uninterruptedly for the previous six years and eleven months.
According to August 2017 US restaurant labor data, employment in Food Services and Drinking Places (FS&DP) stood at 11,761,000 people — 2.5% above the same month the year prior and growing almost twice as fast as overall non-farm employment (1.7 times as fast, to be exact). FS&DP employment has been growing uninterruptedly for 5 years and three months. As of August 2017, 8% of nonfarm payrolls are generated by FS&DP.
Overall, August 2017 saw 156,000 new non-farm jobs created, marking a slowdown in growth below the year’s average so far. Some 9,200 new jobs were created in FS&DP in August 2017, a considerably lower number than the year’s average and a record low since February 2014. In August, only 6% of the jobs created in the non-farm employment sector originated in foodservice.
Leisure & Hospitality was a weak contributor of new jobs (nonfarm employment) in August, contributing only 4,000 net new jobs — nearly 3% of the new jobs in August. Though FS&DP created 9,200 new jobs, other sectors included in Leisure & Hospitality saw far fewer jobs. Performing Arts and Spectator Sports, for instance, saw a decline of 9,000 jobs.
The good news for operators and those investing in foodservice, however, is that the restaurant industry is a bright spot in the American economy. Despite political promises, American manufacturing jobs have continued to dwindle, while employment in the restaurant sector has increased roughly 2.2% per year since the 1990s.
In that same time period, manufacturing jobs have decreased some 1.3%, year over year. The modern manufacturing industry employs just 6% more than restaurants — a striking contrast from 1990, when manufacturing employed 2.7 times as many people as restaurants.
The average hourly wage for employees in the private sector was $26.39 in August 2017. By comparison, the average employee in the Leisure & Hospitality sector earned an estimated $15.47 per hour, or 59% as much.
However, wages for Leisure & Hospitality workers are growing faster (+3.5% in August) than the private sector average (+2.5% in August). The growth in wages is higher than inflation measured from consumer prices (which was 1.7% in July, according to the most recent data available). In other words, these trends translate into the growth of real wages (i.e. those adjusted for inflation).
Over the last ten years, restaurant wages and prices have moved in correlation with one another. Lately, however, wages have been climbing faster. Since the beginning of 2016, wages have grown twice as fast as food away from home (i.e. restaurants). As a consequence, restaurants, especially those in the Full-Service category, are struggling to maintain their margins.
The full effects of the recent two hurricanes to make landfall in the US still aren’t known (Harvey hit Texas between the 25th and 30th of August and Hurricane Irma made landfall in Florida in September), but September’s data is likely to include a negative impact brought on by both disasters. We’ll be updating labor data each month, so be sure to check back. For more about the above categories, and the reports used to quantify these charts, visit US Restaurant Labor Data: An Overview.
Aaron Allen & Associates is a leading global restaurant industry consultancy specializing in growth strategy, marketing, branding, and commercial due diligence for emerging restaurant chains and prestigious private equity firms. We have helped helped restaurant companies around the world drive revenues, increase profits, and enhance the guest experience through improved marketing, messaging, and menu engineering. Collectively, our clients post more than $100 billion, span all 6 inhabited continents and 100+ countries, with locations totaling tens of thousands.