The 83-month-long streak of payroll employment gains appears to have been broken in September. The 33,000-job decline recently announced by the Bureau of Labor Statistics could be revised away in coming months, and in any case it’s more likely due to two big hurricanes than any economic slowdown. Not much to see here, in other words.
But there is one aspect to the payroll report that I couldn’t take my eyes off of. A single sector – food services and drinking places – accounted for all the job losses and then some, with payrolls declining by an estimated 104,700 (0.9 percent) in just one month. Which means that all the other sectors put together added 71,700 jobs.
Why would this one sector be so dramatically affected? Are the Houston area (where Hurricane Harvey caused massive flooding at the end of August) and Florida (which Hurricane Irma rolled through on Sept. 10-11) especially restaurant-and-bar-heavy economies?
No, not really: Food services and drinking places make up only a slightly higher percentage of payroll employment in metropolitan Houston and Florida than in the nation as a whole.
One plausible explanation has to do with how employment is counted. The household survey, from which the unemployment rate is derived, showed gains in overall employment in September. It was only in the establishment survey, source of the nonfarm payroll numbers, that employment declined.
In the establishment survey, employees who are not paid for the pay period that includes the 12th of the month are not counted as employed. In the household survey, persons with a job are counted as employed even if they miss work for the entire survey reference week (the week including the 12th of the month), regardless of whether or not they are paid.
If food-services workers are more likely than those in other sectors to miss out on a paycheck when their workplace is closed for the week – which seems reasonable to assume – then their payroll employment numbers would be more likely to take a big hit from a hurricane. With Florida and metropolitan Houston together accounting for almost 9 percent of national food-services and drinking-places employment in August, that, plus some statistical noise, may explain most of the September food-services jobs collapse.
But it does seem worth at least contemplating whether more might be afoot.
In a much-discussed piece recently published on Eater, Elizabeth G. Dunn attempted to explain the current downward spiral at several big, casual dining chains thusly:
TGI Fridays and Applebee’s and their ilk are struggling as the American middle class and its enormous purchasing power withers away in real time, with the country’s population dividing into a vast class of low-wage earners who cannot afford the indulgence of a sit-down meal of Chili’s Mix & Match Fajitas and a Coke, and a smaller cluster of high-income households for whom a Jack Daniel’s sampler platter at Fridays is no longer good enough.
As an explanation for why these restaurants have, as Dunn puts it, “subsisted in a dismal and persistent state of decline for about a decade,” this makes a lot of sense. The casual-restaurant chains’ decline has accelerated over the past two years, even as the middle class recovered somewhat and overall restaurant spending rose. So maybe people are just tired of TGI Fridays.
Still, spending on food services and drinking places does seem to have plateaued this year. Also, the Russell 3000 Restaurants Index (which is dominated by McDonald’s Corp. and Starbucks Corp.) is down 5.5 percent since hitting an all-time high in early June.
It may just be that, after years of gains in restaurant spending and employment, a bit of a slowdown was inevitable.
At this point, the signs are mostly just muddled. But they’re worth paying attention to over the coming months, in case a clearer signal emerges.
Justin Fox is a Bloomberg View columnist.
