The Restaurant Boom Has Fizzled Out
Employment at food services and drinking places rebounded strongly in October as waiters, cooks and bartenders in hurricane-ravaged Florida and Texas went to work. But that 88,500-job gain in today's employment report was not enough to erase something I wondered about last month: an apparent stalling of the great 2010-2017 restaurant hiring boom.
The picture is clearer if you look at the rolling three-month change in employment:
Now, I should admit that I only first noticed the great 2010-2017 restaurant hiring boom in early August, when the July jobs report came out. Food services and drinking places accounted for more than a quarter of that month's job gains, leading me to calculate that employment in the sector was on track to surpass manufacturing in less than three years. Derek Thompson at the Atlantic, also struck by that month's big gains, noted that "restaurant jobs have grown faster than the overall economy every month for the past seven years."
Well, that's not true anymore! Thompson and I may have called the peak. Our pieces were a little like the Time magazine cover indicator, which, as my Bloomberg View colleague Barry Ritholtz describes it, "essentially tells us when some investment theme or fad has reached a crescendo."
One explanation for what has happened is that, as Rachel Abrams and Robert Gebeloff detailed in the New York Times earlier this week, the restaurant industry, egged on by Wall Street, got ahead of itself.
Customers continue to spend a large share of their food budget in restaurants, but they’re spreading the money across a larger number of establishments, so profits are split into smaller individual pieces. Yet the industry -- particularly chain restaurants -- continues to expand, a strategy that both masks the problem and makes it likely that more places will falter.
If that's what it is, we're not looking at any kind of epochal shift here, just an overshoot that will eventually work itself out and give way to renewed, if less frenetic, growth. There are those, though, who see bigger forces at work, like the ones battering the retail sector, which started shedding jobs a year ago and lost another 8,300 in October.
In any case, it does seem worth pausing to note that there are now two giant service sectors that had been been major drivers of employment growth in this expansion and have switched to shedding jobs. Restaurants and retailers tend not to pay very well, and their rising share of total employment in recent years has been greeted with some concern. With overall employment still growing, it may well be a good thing that jobs are shifting out of these industries and into other ones. But it is definitely a thing, and one to keep watching.
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