Written by Liz D’Aloia

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During the 2015 Global Best Practices meeting we learned a lot about emerging trends from economist Joel Naroff. Joel’s presented a session entitled “It’s the Economy, and You’re Not Stupid”. As Joel noted, there are major economic forces at work that may have a profound impact on your business.

Joel kicked off the session by reminding us that we often make the worst mistakes when change is upon us and we don’t realize it yet. Over the last 7 years, it’s become easy for us to become used to a sluggish, slow economic recovery. This conditioned us to change the way we do business. But things are rapidly turning around. Let’s review how these changes may impact the restaurant industry.

The Improving Economy
The housing market that was a huge factor leading into the Great Recession is in good shape. Prices are up, sales are robust, and construction is going well. The backlog of foreclosures is getting whittled away. Consumer confidence is close to where we were in 2007 (before we knew the housing bubble had burst). Perhaps most importantly, unemployment is down and is closing in on full employment (which is around 5.3 – 5.5%).

Job Openings
With full employment comes hiring challenges. It used to be that you found a job for life. During the recession having a job came first, with job satisfaction a distant second. Many workers feared leaving their jobs. With the ever-present risk of layoffs, many employees preferred to stay with their current employers instead of starting a new job with low seniority. With full employment you can find a job you want to work at. The rate of job openings is back to 2006 – 2007 levels.

joelWages
Back in the early 2000’s, wages increased over time. Wages stagnated during the recession and subsequent weak recovery. Companies got used to being in control in a “buyer’s market” that didn’t require competitive wages. But beware of the time-honored economic law of supply and demand.

As we approach full employment, employers are finding themselves on demand side of this equation. Obviously we all have businesses to run, and we want to hire high quality employees at the lowest possible cost. On the supply side, remember those employees who were afraid to leave jobs during the recession and weak recovery? We demanded a lot more out of them during the recession. They also saw how companies treated their friends, family, and coworkers during corporate layoffs. With the economy recovering, employees are starting to explore new opportunities.

Joel predicts that as the economy continues to recover we’ll see increasing wage pressure in 2015. Right now you might think you don’t need to pay more for employees, but consider your current number of open requisitions. The more open requisitions you have, the more likely it is that you’ll have to increase pay. Remember, unemployment will probably be under 5% by the end of 2015.

To an economist like Joel, job security is defined in terms we can all understand: employees are confident enough in the economy that they can quit their jobs, walk across the street, and get another job. Employees couldn’t do that for the last 7 years, but now they can. Wages will have to go up or companies will lose workers.

joelWage pressure on employers is like a dam, and Joel predicts that the dam could break very quickly. Think about how hard it was to get workers in the late 1990’s and early 2000’s. A dam is building up and the cracks are breaking. Wages will have to go up, and they may have to go up faster than you anticipate. We’ve already seen this happen in some industries that are critical to our operations. For example, some segments of the trucking industry saw wage increases of as much as 6% in 2014, with at least one carrier raising wages by 13%.

Joel’s advice is to be prepared. Wages for certain restaurant industry jobs may go up swiftly and suddenly.

Millenials

Millennials are really important to the industry. They’re making up a bigger share of the workforce and are already the majority generation in the US. The good news is that this is your target demographic for employees. Remember, though, that millennials also have the most mobility. You have a real risk of losing millennial employees if they’re not fulfilled at work.

But it’s not all bad news on the millennial front. Think about it like this: millennials are just approaching their peak earning years. As wages go up in the economy millennials will get the bigger chunk of these increases – not the Gen X or Baby Boomers. Although their wages will go up, this means that millennials will have more disposable income.

The best news of all? Milennials think that eating out is a necessity not a luxury. They’ll be eating out even more than Boomers.

1f8e46dLiz D’Aloia is the founder of HR Virtuoso, a mobile recruiting company based in Dallas, TX. She is an HR professional, employment attorney, speaker, and blogger. Prior to launching HR Virtuoso Liz worked at national transportation companies and at a global retailer. Connect with Liz on LinkedIn and follower her @hrvirtuoso.

Event photos captured by Steph Grant | www.stephgrantphotography.com