Friday, April 5, 2013

Operators’ confidence in the economy is tenuous

In his latest commentary, the National Restaurant Association's Chief Economist Bruce Grindy breaks down the latest labor indicators.  Both the restaurant industry and overall economy added jobs in March at their slowest pace since mid-2012.  While the business environment remains generally positive for restaurants, operators’ confidence that it will remain that way is tenuous.

Due largely to softer sales as a result of the payroll tax hike, job growth in the restaurant industry slowed in recent months.  Eating and drinking places added a net 13,000 jobs in March on a seasonally-adjusted basis, the smallest gain since May 2012 (12,000 jobs), according to data from the Bureau of Labor Statistics. 

The March slowdown was even more pronounced in the broader economy.  The overall economy only added a net 88,000 jobs in March, down from a gain of 268,000 jobs in February and the weakest growth since June 2012. 

Looking beyond the March numbers, restaurant industry job growth outpaced the overall economy in recent months.  Between the first quarters of 2012 and 2013, eating and drinking places added jobs at a strong 3.1 percent rate, nearly double the 1.6 percent gain in total non-farm payrolls during the same period.

The National Restaurant Association expects restaurant job growth to outpace the overall economy by a full percentage-point in 2013, and the first quarter results indicate that there is substantial upside to this outlook. 

Overall, the restaurant industry has been one of the top job creators since the end of the recession.  In the three years since the beginning of the jobs recovery in March 2010, eating and drinking places added a net 856,000 jobs, ranking only behind the professional-and-business services (nearly 1.8 million jobs) and health care and social assistance (949,000 jobs) sectors. 

While job growth in the restaurant industry slowed in the first quarter, average weekly hours of restaurant employees remained on par with 2012 levels, which suggests that the full-time/part-time mix of the industry workforce hasn’t changed to this point.  Non-supervisory employees at restaurants worked an average of 24.2 hours in February, unchanged from the February 2012 level.  (Note that industry-level wage and hour data are one month lagged from the employment data.)

Although the economic environment remains generally positive overall, restaurant operators’ confidence that it will stay that way is tenuous.  In the Association’s March 2013 Restaurant Industry Tracking Survey, only 25 percent of restaurant operators said they expect economic conditions to improve in the next six months.  Twenty percent of operators expect economic conditions will worsen, while 55 percent think conditions will remain about the same.  However, this is still an improvement over their outlook in late-2012, when confidence was decidedly pessimistic due to the uncertainty surrounding the fiscal cliff.

No comments:

Post a Comment