Employment pressures remain for restaurants in 4Q

The People Report Workforce Index, which measures expected market pressures on restaurant employment, remained nearly flat for the fourth quarter.

The fourth-quarter index registered 69.3, down slightly from 69.9 in the third quarter, and indicated that restaurant operators will continue to face recruitment and retention challenges for the next three months.

In the third quarter, the index reached its highest point since the fourth quarter of 2006, when it registered 70.6 and then began falling as the recession took hold.

The Workforce Index is produced by Dallas-based People Report and is based on surveys of human resources departments and recruiters in the restaurant industry. It measures from a baseline value of 50, with any results over that level indicating increased pressures on five components: employment levels, recruiting difficulty, vacancies, employment expectations and turnover. Results are based on expectations for the quarter underway.

“It’s a really strong overall reading,” said Michael Harms, executive director of operations for the People Report and sister company Black Box Intelligence, in an interview Friday. “The employment pressures are growing. There is job growth expected. Things aren’t going to get easier for staffing these operations.”

The “employment levels” component of the index registered a value over 70 for the second consecutive quarter, a level that the index had not seen since the first quarter of 2007. And the “employment expectations” component hit its highest value of the year, 78.6, in the fourth quarter, as a majority of the surveyed companies said they were looking to add staff at both the hourly and management levels for the third consecutive quarter.

“The overall index reading that we are seeing is indicative of once again some increasing employment pressures in the industry,” Harms said. “We’re seeing job growth. We’re seeing strong expectations for job growth to round out the year, which is good as you are going into the holiday season.

U.S. job growth in the third quarter was slightly softer than in prior quarters this year. After adding 622,000 jobs in the first quarter and 547,000 jobs in the second period, the economy created 430,000 new jobs in third quarter. That reflected a slight decline from the 456,000 new jobs created in the third quarter of 2012.

Pressures in restaurant employment have not been fueled by turnover, Harms said.

“Oftentimes the biggest headache for operators is the rising turnover rates at the hourly and management level,” he explained. “What we’ve seen over the last 12 to 18 months is relatively flat turnover rates. It really hasn’t skyrocketed, so these pressures are being driven by something other than turnover, which is a kind of unique phenomenon for the industry.”

The overall economy “is not exactly on fire,” Harms said. “That may be what is keeping turnover rates relatively flat,” he said, as employees decide to stay put rather than shop around for such options as more pay or more flexible hours.

The Workforce Index did note some rise in recruiting difficulty.

“We’ve seen some companies with difficulty in finding employees that we haven’t seen in a long time, even going back to late 2006, that pre-recession, pre-crash period,” Harms said.

Index rankings by industry category for the third quarter include:

• Quick service inched up to 67.3 from 66.8.
• Fast casual/family dining decreased to 62.2 from 66.8.
• Casual dining fell to 69.4 from 75.6.
• Fine dining/high volume rose to 73.4 from 66.2.

Contact Ron Ruggless at [email protected].
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