July 2018 U.S. Jobs Report Labor Data

July 2018 U.S. Jobs Report: Rising Wages Put Pressure on Margins

The July 2018 U.S. jobs report showed that employment continues to grow with no sign of deceleration overall. However, new jobs in restaurants has slowed slightly — just over half of a percentage point — when compared to last year. Foodservice employment increased by a monthly average of 2.6% between January and July 2017; for the same period in 2018, growth is 2.0%.

Despite this slowdown, the leisure and hospitality sector added the second-most jobs in July, and wages grew faster than inflation as well as in the private sector overall.

July 2018 U.S. Restaurant Labor Data: Employment

Some 157,000 jobs were created in the U.S. in July, marking seven years and ten months of uninterrupted growth. Average monthly job creation is 214,700 year to date, 18% higher than 2017.

These numbers are largely influenced by the positive figures in the restaurant industry: foodservice and drinking places saw an increase of 26,200 employed persons, 9% greater than the previous month. Year to date, however, there’s a deceleration of 31%.

As of July, the leisure and hospitality sector (including arts, entertainment and recreation in combination with accommodation and food services) employed 16.4m people in the country, making it the third largest non-government employer, behind education and health services (23.7m jobs) and professional and business services (21.0m positions).

Leisure and hospitality ranked second in job creation in July. A full 40,000 jobs were created in the industry, only behind the job creation figures for professional and business services. Year to date, the leisure and hospitality industry has created 10% of new jobs, amounting to 158,000 positions.

July 2018 U.S. Restaurant Labor Data: Wages

Meanwhile, wage growth continues to be moderate, though higher than in the overall private sector figures.

Average hourly earnings for the private sector increased 2.7% (compared to last July), reaching $27.05. Hourly wages in the leisure and hospitality sector increased faster than the average, growing 3.2% in July year over year. Overall, wages in leisure and hospitality are close to 40% lower than the overall average in the private sector.

Labor costs and rent increases are putting pressure on restaurant margins. Food prices deflated in 2015 and 2016 while wages have been increasing more than 3% each year, allowing lowering COGS to offset rising labor costs.

Wage and Rent Increases Pressuring Margins

With food inflation starting to pick up, operators will need even smarter plans to maintain their margins.

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 in annual sales, span all six inhabited continents and 100+ countries, with locations totaling tens of thousands.

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