The American dining crisis will be devastating for the US economy

Updated 3 min read
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Will reopening indoor dining bring back jobs in the heavily damaged American restaurant industry?

In New York City, restaurants are gearing up to re-open indoor dining on Sept. 30, when indoor dining will be permitted at 25% capacity. But if re-openings in other parts of the country are any indicator, that move could be a little too late with restaurants already opting to shutter their doors – for good.

In the United States, the restaurant industry represents about 4% of GDP but employs about 8% of the total labor force. Since the pandemic began, restaurants saw a startling drop in business: spending at bars and restaurants dropped 52% year-over-year in April (based on U.S. Census Bureau data on advance retail sales).

So did employment: payrolls at bars and restaurants fell 48% year-over-year in April, representing 5.8 million workers (based on figures from the U.S. Bureau of Labor Statistics).

As areas of the country began to re-open later in the summer, restaurants and the hospitality industry saw a massive spike in hiring.

But as virus cases rose in late summer, hiring in food services and accommodation slowed – from 1.6 million hires in June, to 998,000 hires in July (based on JOLTS data from the BLS). The slowdown in hiring could be due to a number of factors: lower demand for eating out or caps on dining capacity.

A slowing recovery in restaurant jobs could also be the result of a more permanent trend: restaurants, which were temporarily closed, deciding to shut their doors for the last time.

New data released by Yelp shows that among the 32,109 companies marked as closed as of Aug. 31, about 61% (19,590 businesses) are now closed permanently. Losing these employers would mean full erasure of their work forces, making it hard for those jobs to come back.

Data from Yelp show that as of August 31, restaurants marked as closed at the beginning of the crisis are more likely to have closed permanently compared to other industries. Source: Yelp Economic Average
Data from Yelp show that as of August 31, restaurants marked as closed at the beginning of the crisis are more likely to have closed permanently compared to other industries. Source: Yelp Economic Average

This situation has been especially dire in New York City. At the depth of the crisis, the industry saw a 71% year-over-year reduction in people employed at restaurants and bars.

The recovery in employment has been far slower in New York than in other parts of the country, where the year-over-year shortfall in employment is between 15%-25%.

As New York restaurants finally open their doors at the end of the month, it’s hard to gauge the impact indoor dining will have on employment levels in the industry.

If the slower job recovery is due to limitations on dining or reduced demand, those jobs could come back at a later date. But if those job shortfalls stem from permanent closures in the industry, restaurant employment levels may have a far harder time getting back to pre-pandemic shape.

Brian Cheung is a reporter at Yahoo Finance. Valentina Caval is a producer.

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