guestXM – by Black Box Intelligence

Don’t Be Fooled by the Numbers, Restaurant Industry Still Facing a Turnover and Engagement Crisis

A summary of the BLS March Employment Report gives the restuarant industry encouragement from job growth, but doesn't help with labor shortage.

Facing the Turnover Challenge

The Restaurant Industry’s Staffing Struggles Continue

Later this month, Taco Bell, one of the industry’s largest employers, announced that it will throw 600 hiring parties in 450 cities. The goal is to hire 100,000 employees, most of them increasingly fickle and scarce teenagers. The initiative is based on successful pilot hiring parties launched last summer, that allowed managers to screen, interview, hire, and even onboard employees immediately. While thinking “outside the bun,” hiring this many employees is no joke. Last week, the March Employment Report confirmed that staffing challenges are not going away for operators anytime soon.

A quick summary from Black Box Intelligence (formerly TDn2K)™ economist, Joel Naroff:

Key Data: Payrolls: +196,000; Private: +182,000; Manufacturing: -6,000; Wages: +0.1%; Unemployment Rate: 3.8% (unchanged)

In A Nutshell: “Job gains are back on track, but the trend is still down.”

What It Means: After the initial report that only 20,000 new positions were added, angst about the state of the economy took hold. Today, those same worrywarts are probably smiling. Job gains came in above expectations in March and there were some minor, but positive revisions to the January and February numbers. But the details don’t tell me that this was a great report. As I have mentioned frequently, concentrate on the three-month moving average. That number decelerated again and will likely continue to do so when we get the April report as the January number disappears. Private sector job gains were solid but not great over the past three months, averaging 168,000. As for March, there were only two strong sectors, health care and restaurants, while manufacturing and retail were down. A bounce in state and local government hiring, which I don’t expect to continue, helped push up the overall gain.

Wages rose minimally and the increase over the year decelerated. That was a real surprise given all the stories of firms raising wages. That may just be a one-month wonder, but it is something to watch. We need stronger, not weaker wage gains if the economy is to grow faster. Second, the labor force participation rate declined.

Naroff does predict that even for restaurants, hiring will soften in April. That won’t be enough to make a dent in the pent-up demand. We face the perfect storm of fewer working teens, increasing turnover of managers and employees, fierce competition from retail, and a crisis of employee engagement. According to Black Box Intelligence (formerly TDn2K)’s 2019 Recruiting and Turnover Report, 76 percent of restaurant employees are leaving their jobs voluntarily. Job abandonment is at a historic high, and compensation is again one of the top reasons why employees are leaving to go to competitors.

Black Box Intelligence (formerly TDn2K) research indicates a widening gap between restaurants that are performing in the top quartile of brands, versus those at the bottom. The brands that can navigate the labor shortage through not just creative hiring, but also engagement and retention are the ones being rewarded with higher sales and traffic.

“Through Black Box Intelligence (formerly TDn2K)’s collaboration with GALLUP®, Restaurant Manager Connect, we have been able to begin studying the correlation between engagement and bottom-line results. Our initial study shows evidence that brands with higher engagement have lower turnover. Gallup research validates that at least 70 percent of engagement is driven by managers,” said Joni Thomas Doolin, founder and chairwoman at Black Box Intelligence (formerly TDn2K). “As we work to solve our workforce challenges, we have a real opportunity to focus on engaging and retaining our general managers. We know that success with this keystone position, will, in turn, connect our values and culture to our staff and customers.”

This update was created in part by Joel Naroff, Black Box Intelligence (formerly TDn2K) economic and President and Chief Economist of Naroff Economic Advisors

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