MainStreet Macro: The Restaurant recovery

The Restaurant recovery

Whether you started this week with the Super Bowl or Valentine’s Day romance – or both — chances are that restaurant food, be it wings or a romantic dinner, was a big part of your plans.

This week we take a look at the restaurant sector. It’s been a crucial part of the jobs recovery and a barometer of consumer spending and health during the pandemic.

Here are three trends to watch.

1. Restaurants are still in recovery mode

Eateries of all types were hit hard by the pandemic. Employment fell by half and revenues dropped nearly 9 percent in the early days of the virus. Restaurants had to adapt to a new pandemic reality – fewer customers, more takeout, demand for outdoor dining, and stricter health protocols.

The hard work is paying off. The industry added more than 100,000 jobs in January. But headcount in the broader leisure and hospitality industry is still 1.8 million short compared to where it was before the pandemic started.

2. Quitting is less of a thing

Even before the pandemic, leisure and hospitality had the economy’s highest rate of voluntary turnover. The typical restaurant worker is both younger and less well-paid than people in other industries. That leads to more frequent job changes.

During the pandemic, the number of workers quitting restaurants and hotels hit an all-time high. Not surprisingly, openings in the sector soared.

But there’s evidence that the restaurant jobs scene is starting to stabilize. The latest data shows that fewer restaurant workers quit in December than the month before. Right? OR something specific about the time frame if possible. 

One reason could be a bump in pay. Hourly wages in the hospitality sector are up about a dollar from pre-pandemic levels.  And it’s the only industry where workers make more staying on the job for a year or longer than switching to a new job in the same industry.

3. New challenges lie ahead

Food prices have jumped since early 2020. Last week, we learned that annual headline inflation was 7.5 percent in January, up from 7 percent in December. The jump in prices was big — enough to surpass most economists’ expectations.

Food prices alone were up 7 percent from a year ago, rising at a faster annual pace than the 6.3 percent year-over-year growth recorded in December.

With higher food and labor costs, it’s no wonder hamburger joints, brasseries and other eateries have had to increase prices. Menu prices are also up 7 percent higher than they were a year ago, the largest annual increase since 1977! That Valentine’s Day filet and chocolate souffle just got pricier.

My Take:

In the fall of 2019, I made plans with friends to take a walking food tour of Queens. New York’s most diverse borough is known its variety of mom-and-pop restaurants, which serve cuisine from all over the world.

We talked excitedly about hopping on and off the subway to sample Pakistani bakeries, Mexican taco shops, Italian pizzerias, and ice cream cones (for the kids, of course). 

Our plans changed, we delayed our outing, and a few months later the world changed. Missing that trip still stings, but after a two-year delay I’m looking forward to visiting Queen’s eateries with a fresh appreciation for all they’ve been through.

Restaurants are critical to the Main Street economy. They’re also part of its identity, serving up both tradition and longevity and innovation and new experiences.

Two-thirds of restaurants are small businesses, and they’re one of my favorite parts of Main Street.  I hope this year these hard-working businesses feel the love of a resilient economy.