US restaurants finally get labor relief with more workers seeking jobs (updated)

Dine Brands Global

05/05/2023 15:09

(Updates with April labor market figures)
    By Hilary Russ
       NEW YORK, May 5 (Reuters) - More job seekers are filling
out applications to sling Big Macs at McDonald's  MCD.N , and
Starbucks  SBUX.O  baristas are staying in their jobs longer, as
a cooling economy sends workers back to low-wage restaurant gigs
and keeps them there.
    "We're seeing the labor situations improving," McDonald's
Chief Executive Chris Kempczinski said during a quarterly
earnings call last week. "In the U.S., they've made a lot of
progress on staffing in the restaurants."
    The broader labor market remains strong overall. The
household unemployment rate dipped to 3.4% in April, the U.S.
Labor Department said on Friday, and nonfarm payrolls grew by
253,000.
        Leisure and hospitality hiring for the month grew by
31,000 jobs, which is slower than the six-month average of
73,000 jobs per month. Employment in the industry is still 2.4%
below pre-pandemic levels, however, part of the effects of
restaurants shutting during the pandemic.
  
    "We're seeing application rates increase, retention rates
continue to increase, and our staffing levels are back to, at or
near 2019 levels," Yum Brands  YUM.N  Chief Financial Officer
Chris Turner said during the company's quarterly earnings call
on Wednesday. Yum owns Taco Bell, Pizza Hut and KFC brands.
    Once the economy rebounded, many fast-food workers quit
grueling, low-wage jobs to work in booming sectors that paid
more and were desperate for workers, including in transportation
and warehousing.
    The restaurant industry shed millions of jobs. Chains from
IHOP  DIN.N  to Burger King  QSR.TO   TAST.O  expected to remain
perpetually understaffed for the foreseeable future - especially
amid a post-pandemic boom in demand for dining out.
    But now, inflation-wary consumers are buying fewer motor
vehicles and other expensive purchases, pressuring manufacturers
and retailers.
    As retail demand softens, "a lot of unskilled labor that
went there is now making its way back to our industry in
general," Scott Boatwright, chief restaurant officer at Chipotle
Mexican Grill, said in an interview last week. "We're getting
more than our fair share of that labor pool."
    As of April, there were 12.25 million people working in the
food services industry, the U.S. Labor Department said, just a
shade under the 12.34 million peak in February 2020, just before
the pandemic broke out in the United States. 
    Chipotle's staffing level is at an all-time high – far above
pre-pandemic levels – and retention is at its best in the last
five years, Boatwright said, though he declined to disclose the
company's turnover rate.     
    Starbucks Chief Executive Laxman Narasimhan said during the
coffee chain's quarterly earnings call on Tuesday that barista
turnover fell by 9% compared to a high in March 2022.
    He attributed the easing to higher salaries, benefits and
training, as well as investments in technology that has led to
productivity gains and employee satisfaction. 
    Most restaurants boosted wages and benefits during their
frenzy to find workers over the last couple years, which may now
also be paying off.
    The pay gap between the leisure and hospitality industry -
historically, the lowest-paying sector - and other industries is
at its narrowest since 2006, when the government began
collecting the data, said Wells Fargo Senior Economist Sarah
House.
    In April, leisure and hospitality workers earned 63% of what
workers in other industries made overall, compared to about 57%
in December 2020.
    Wage inflation is expected to slow in the second half of the
year, said Credit Suisse Chief Economist Ray Farris.
    "Companies are going to be able to be a little more
selective," he said, "and potential employees are going to have
to be a little more flexible."

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 (Reporting by Hilary Russ;
Editing by Alistair Bell and Andrea Ricci)
 ((Hilary.Russ@thomsonreuters.com; +1 (646) 223-7381; Reuters
Messaging: hilary.russ.thomsonreuters.com@reuters.net))