Restaurants are having all kinds of trouble finding workers - and this is a great sign for the economy
In a note to clients on Wednesday, Citi's Gregory Badishkanian explained that while restaurants are generally optimistic about their industry, they're worried about labor costs and finding new workers.
"With the economy steadily improving and the jobless rate trending down, as well as improved hiring figures from within the restaurant industry, operators are seeing intensifying competition for employees and pressure on wages," Badishkanian wrote. "Longer-term, operators continue to worry about rising wages and some casual dining operators worry about the elimination of the tip credit."
In other words, restaurant operators feel they will either have to pay their workers more or devote more resources (money) to finding and retaining workers. This means that there are likely higher-paying jobs elsewhere that potential employees are seeking out instead.
And this points to a labor market that is getting "tighter," with the balance of power swinging from employers back to employees.
This echoes the Fed's comments released in it's latest Beige Book on Wednesday, that wages are rising and companies are having trouble finding workers. The Fed reported that "slight wage growth" was evident in most districts, with firms in the Cleveland, Atlanta, Chicago, and Minneapolis Districts reported struggling to retain their employees.
Furthermore, Richmond, Kansas City, and San Francisco all reported higher wages in the restaurant and/or hospitality industries."A tight market for skilled construction labor in the Boston, Dallas, and San Francisco Districts pushed up wages for workers there, and staffing services firms in Boston, New York, and Dallas noted rising wages," the Fed wrote. "Contacts across various industries in the Chicago District reported a willingness to raise wages when necessary to attract and retain workers, and a notable share of reporting firms in the Minneapolis District also said they were increasing starting pay for most job categories to attract new hires."
On Friday, we'll get the latest update on the labor market when the BLS releases its latest jobs report.
Wall Street currently expects the US economy added 225,000 jobs in May and expects unemployment rate to remain steady at 5.4%. Wage growth is expected to rise 0.2% month-on-month in May and 2.2% over the prior.