October 2017 US restaurant labor data was largely a mixed bag. While job growth outperformed expectations, wage growth slowed — though it’s important to note that hourly wages in the Leisure & Hospitality sector increased faster than the average of the private sector.
Below, we take a further look at where employment and wages stand as of October 2017, along with how they’ll shape the industry and impact restaurant companies, investors, and operators in the months ahead:
October 2017 US RESTAURANT LABOR DATA: EMPLOYMENT
Some 261 thousand jobs were created in the US in October, outperforming expectations and reinforcing the signs of a strong economy. This marked seven years and one month of uninterrupted growth, after September data was revised upwards. The average monthly job creation is at 168,500 year to date (10% lower than 2016).
That increase was largely influenced by the positive figures witnessed in the restaurant industry: Food Services & Drinking Places saw an increase of 88,500 employed persons – turning around the negative trend witnessed in September and August.
The Leisure & Hospitality sector lead job creation in October, as the industry recovered from the closure of businesses in the areas hit by the hurricanes. A full 106,000 jobs were created in the industry, more than the job creation figure for Professional & Business Services and Education & Health Services combined.
Year-to-date, the industry has created 14% of the new jobs, some 235,000 jobs, only surpassed by Professional & Business Services and Education & Health segments.
The unemployment rate at restaurants is decreasing fast, making it more important for operators to make an effort to retain key staff. While historically above the unemployment rate of the overall economy, the average unemployment rate for restaurants has decreased by 23% since 2015 (compared to 14% for the overall economy). The difference between the two rates is now at its lowest since 2013.
SEPTEMBER 2017 US RESTAURANT LABOR DATA: WAGES
Meanwhile, wage growth continues to be weak, according to October 2017 US restaurant labor data. The average hourly earnings for the private sector increased 2.4% (compared to the October 2016), to reach $26.53. Hourly wages in the Leisure & Hospitality sector continue to increase faster than the average for the private sector, growing by 3.4% YOY.
The October increase in the Leisure & Hospitality sector is similar to the previous month, and about 40% larger than the increase in the average hourly wages for all the private sector. Since March, however, the rate of increase in wages in the sector is decelerating, which compares with an stability of the wage growth rate for the overall private sector. Overall, wages in Leisure & Hospitality are close to 40% lower than what’s usual in the private sector, though the difference has been slowly decreasing in the last four years.
Though in the last ten years restaurant wages and prices have moved in a high correlation, wages have recently been climbing faster. The increase in wages since the beginning of 2016 has doubled the increase in prices of food away from home. As a consequence, restaurants — especially those in the full-service category — are struggling to maintain their margins.
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.
ABOUT AARON ALLEN & ASSOCIATES:
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.
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