As restaurants endure economic losses, others feel pain, too

Paul Wiseman

WASHINGTON (AP) — Restaurants helped revive the United States (US) economy after the Great Recession of 2007-2009.

This time? Don’t count on it. As the nation struggles to rebound from a now-resurgent coronavirus, restaurants seem much less likely to deliver an economic boost. They’ve suffered a heavy blow from lockdowns and occupancy restrictions, and it’s unclear how readily Americans will return en masse to dining out.

Consider the Barrel Room, a San Francisco restaurant whose owner cautiously re-opened this month, hoping to salvage as much of 2020 as possible. To stay afloat after a lockdown took effect in March, the restaurant tried selling groceries and delivering drinks to customers. Owner Sarah Trubnick also fought through red tape to obtain federal aid — a process she likened to living in a Kafka novel.

As confirmed infections climb, Trubnick is bracing for the worst.

“We are prepared at any minute to close again,’’ she said. “It’s a very stressful situation.’’

Owner of The Barrel Room Sarah Trubnick at the restaurant in San Francisco. PHOTO: AP

Across the nation, millions of restaurant jobs have vanished in the face of lockdowns. Just when eateries of all categories and price levels had been anticipating a summertime comeback, new viral cases are upending everything.

The damage extends beyond darkened kitchens and dining rooms to the farms that supply them and the shopping centres that have grown to depend on restaurants as anchors to replace now-vanished stores that couldn’t compete with Amazon and Walmart.

Owner and executive chef of Underbelly Hospitality in Houston Chris Shepherd said in an online essay that he might have to close his four restaurants because his company’s revenue is just 30 per cent of what it was a year ago.

“I employ 200 people in this community,” Shepherd wrote. “When I shut down, they lose their jobs. I’m no longer able to pay my farmers, cleaning companies, valet companies and linen companies. Our reach is long.’’

Before the pandemic, restaurants had employed 11 million workers nationwide — more than the number who work in construction or in factories that produce high-priced manufactured goods. They generated more revenue than grocery stores. From 1990 through February this year, restaurant jobs grew more than twice as fast (91 per cent ) as overall jobs (40 per cent).

“The restaurant industry’s role in the economy is outsized compared to its share of overall gross domestic product (GDP),” said Chief Economist at Moody’s Analytics Mark Zandi. “As it is often among the first jobs for many workers, it is critical to the training of the American workforce. It is also a vital source of jobs and incomes for lesser-skilled and educated workers.’’

The struggles in the restaurant industry also disproportionately hurt Black and Hispanic workers. Together, they account for more than 40 per cent of restaurant jobs, versus 30 per cent of overall US jobs.

As restaurants reluctantly closed their dining rooms, their sales sank from USD66 billion in February to USD30 billion by April — the lowest such total, adjusted since inflation, since 1983. In June, boosted by delivery and takeout customers, sales rebounded to USD47 billion. But many restaurants desperately need to re-open their dining rooms.

“You cannot profitably run a takeover-delivery model if you also have 60 dark tables in the front of the house,” said Sean Kennedy of the National Restaurant Association.

Restaurants had cut nearly 5.4 million jobs in March and April before restoring 1.4 million of them as states began to re-open in May. But the bounce-back is in jeopardy. Confirmed cases have surged across the South and West, forcing states to slow or reverse plans to re-open. Zandi said he worries that restaurant jobs won’t return to pre-pandemic levels until the mid-2020s.

The data firm Womply reports that restaurant closures began rising in late June, especially in Texas, Arkansas and Arizona after having fallen steadily from late April into June.

“People are not out eating,’’ said Genell Pridgen, whose family runs a restaurant, butchery and three farms in North Carolina. “I’m not sure how long it will take for normal to get back.’’

Analysts say it’s unclear when Americans will feel comfortable enough to pile into diner booths or how long state and local governments will require them to operate at reduced occupancy.

“They won’t be able to squeeze tables in like they used to,’’ said Senior Economist at the commercial real estate research firm Moody’s Analytics REIS Barbara Denham. “A lot of those restaurants … can’t make a profit on a table setup that is half of what is used to be.’’