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Wages rise as restaurants keep hiring

Blog: Industry adds 29,300 jobs in June as hiring spree continues

This post is part of the On the Margin blog.

Restaurants continued their hiring spree in June, and that’s having a predictable effect on wages.

The industry added 29,300 jobs in June, or about one out of every eight jobs, according to newly released federal data. The economy as a whole added a robust 222,000 jobs, more workers entered the workforce and the unemployment rate ticked up to 4.4 percent. 

Restaurants employ 8 percent of the total non-farm labor force, but they added 13 percent of jobs in June.

None of this should come as a surprise to NRN readers. Restaurants have been the leading hirers of workers for years now, as restaurant chains expand and independents add units, becoming smaller chains.

Over the past year, restaurants have added 277,000 jobs, increasing total employment in the industry by 2.4 percent.

Job growth suggests at least healthy enough demand for the industry to expand. After all, operators don’t add employees if they don’t have the sales to support them.

By comparison, the population grew by an estimated 0.6 percent over the past year, and the economy as a whole added just over 2.3 million jobs over the past 12 months, a rate of 1.6 percent.

All of this hiring has a downside, of course, in the form of a more challenging labor environment that is driving up wages. Average weekly earnings in the leisure and hospitality sector, which restaurants dominate, increased 4 percent over the past year. By contrast, average weekly earnings as a whole are up 2.8 percent.

To be sure, the industry is more prone to the impact of higher minimum wages in many states than are other industries that hire fewer, low-skilled workers. But competition for labor is playing a bigger role in driving up wages, based on numerous surveys and comments from industry executives.

As we’ve said before, restaurants could probably use some efficiency-boosting, labor-saving technology strategies to reduce their reliance on so much low-skilled labor. But so far, efforts to add kiosks and smartphone ordering apps don’t appear to be having much of an impact on wages or job growth. Robots are clearly not taking away any restaurant jobs, and they won’t for the foreseeable future.

Labor issues will remain a headache for restaurant executives. Portillo’s CEO Keith Kinsey told me on Thursday that it takes the company longer to fill jobs at new locations. That echoes a refrain from his counterparts at many other chains. 

Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.

Contact Jonathan Maze at [email protected]

Follow him on Twitter: @jonathanmaze

TAGS: Workforce
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