Hospitality employee turnover rate edged higher in 2016

Hospitality employee turnover rate edged higher in 2016

The turnover rate in the hospitality sector topped 70 percent for the second consecutive year, but still remained below pre-recession levels, according to the NRA’s Chief Economist Bruce Grindy.  His Economist’s Notebook commentary and analysis appears regularly on and Restaurant TrendMapper.

Many of the available job opportunities in the restaurant industry are created by the natural churn in the workforce. In fact, restaurant industry turnover tends to be higher than overall private sector turnover for a number of reasons.

First, the restaurant industry is the economy’s largest employer of teenagers, as one-third of all working teenagers in the U.S. are employed in a restaurant, according to data from the Bureau of Labor Statistics.  Many of these 1.6 million teenage restaurant workers are getting their first job experience, and will go on to start a career with a different employer, either inside or outside the restaurant industry.

Second, the restaurant industry employs a high proportion of students, who typically don’t work on a full-year schedule.  Twenty-seven percent of eating and drinking place employees are enrolled in school, versus just 11 percent of the total U.S. employed labor force, according to the U.S. Census Bureau’s 2015 American Community Survey (ACS).

The restaurant industry also boosts seasonal staffing levels at various points throughout the year, which adds to the normal cyclical turnover numbers.  For example, the restaurant industry is one of the economy’s largest creators of seasonal jobs during the summer months, adding more than 500,000 jobs during an average summer season.  Overall, 31 percent of the eating and drinking place workforce are part-year employees, compared to 18 percent of the total U.S. workforce, according to the ACS.

Full-year employees also contribute to the industry’s comparatively higher turnover rate, as upward mobility in the restaurant industry often happens when employees move from one restaurant to another.  More than any other industry in the economy, the existence of multiple restaurants in nearly every community gives employees additional opportunities for upward mobility and career growth.

In 2016, the turnover rate in the hospitality sector topped 70 percent for the second consecutive year, according to data from the Bureau of Labor Statistics’ Job Openings and Labor Turnover (JOLTS) program.

The overall turnover rate in the restaurants-and-accommodations* sector was 72.9 percent in 2016, up slightly from a rate of 72.2 percent in 2015.  It also represented the sixth consecutive annual increase, after falling to a cyclical low of 56.4 percent in 2010.

Despite the recent gains, the turnover rate remains below the historical average during non-recession years. In 2007, prior to the economic downturn, the turnover rate in the restaurants-and-accommodations sector was 80.7 percent. This was generally on par with turnover in the previous five years (2002-2006), when the annual rate averaged 80 percent.

In comparison, the average turnover rate for all private sector workers stood at 46.1 percent in 2016, up nearly six percentage points from the 2010 low but still below the average turnover rate of 50 percent during the 2002 – 2006 period.

The JOLTS program breaks turnover into three components, with the sum of the parts representing the overall turnover rate.  The quits rate in the restaurants-and-accommodations sector was 53.5 percent in 2016, while the layoffs-and-discharges rate was 16.7 percent.  Other separations, which include retirements, transfers, deaths, and separations due to disability, comprised 2.7 percent of the sector’s turnover rate in 2016.

Most sectors of the economy saw their overall turnover rates decline during the challenging economic environment of 2008 – 2010, as people were less likely to quit their jobs with fewer other employment opportunities available. However, the quit rate rose in recent years, which indicates that workers are increasingly confident in the labor market and are willing to move to another job.

*Note that the turnover figures presented are for the broadly-defined Accommodations and Food Services sector (NAICS 72), because the Bureau of Labor Statistics does not report data for restaurants alone.

(Source: National Restaurant Association)

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