Economic Outlook Shifting for Restaurants & Workers

June 24, 2010 | by Michael Harms

As unemployment has risen over the past couple of years, we've seen turnover fall to record lows. This really should come as no surprise-it's basic economics: the supply of workers increases as the demand for workers goes down. And when the demand for workers is low and there is little competition among employers for workers, wage growth is stagnant.

This, in a nutshell, is what we've just experienced. These were a few of the effects of "The Great Recession." But guess what---the recession's over. And while money may not be falling from the sky, it's important that we recognize that the tide has turned, and to quote an underappreciated British band, "It's gettin' better, man!"

Just as shifts in the economy brought about declining sales, rising unemployment, and falling turnover, as the overall economic outlook improves we are going to start seeing shifts in the other direction. Comp sales and guest counts are moving into positive territory after many months of negative sales. And since employment changes are generally a lagging economic indicator, it means workplace changes are on the horizon.

According to the recent People Report Economic Conditions Survey, 48% of restaurant companies reduced staff at the corporate level in 2009. Just 3% plan to make additional cuts in 2010. Restaurants posted positive job growth for the first three months in 2010, adding over 42,000 jobs. This was the first string of three consecutive months of job growth since the end of 2007 when the recession began.

And what's the outlook for the second quarter? More job growth ahead according to the People Report Workforce Index. Nearly all companies surveyed planned to maintain their current staffing levels or increase staff in the months ahead.

Changes to compensation may be on the horizon as well. After many companies froze salaries in 2009, the percentage of companies who have lifted this freeze has dropped considerably in 2010.

Just as we went through a period of considerable change in 2008 and 2009, we are going through a period of flux right now. It's called a recovery. If you think workplaces issues aren't a concern right now, consider this your warning. The issues you shelved for the last two years are on their way back, slowly but surely, and with an added dose of government intervention, addressing them will be even more challenging.

Topics: Human Resources

Michael Harms / Michael Harms is a Senior Business Analyst for People Report & Black Box Intelligence, acknowledged leaders in providing restaurant executives with financial analysis and insight into the best people practices.
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