Eating Out Has Changed

There seems to be no aspect of life that the COVID-19 pandemic has not altered in some way. From mundane simple social gatherings to major public health initiatives like vaccines. The social, economic, and political fallout from the pandemic and its ongoing aftermath have come to define the current climate we now live in. Perhaps nowhere has this impact been more apparent than in the restaurant industry.

At the onset of the pandemic eating a meal out at a restaurant exemplified one of the riskiest activities somebody could do to expose themselves and others to COVID-19. As stay-at-home orders began to expire and vaccines were distributed, the economics of the restaurant industry became a key barometer of just how “back-to-normal” a place was getting to. Now after three years since the start of the COVID-19 pandemic disruption in March 2020 there is a bevy of data to point at just how different the restaurant industries are at various metro areas across the country.

Specifically, the Quarterly Census of Employment and Wages (QCEW) survey data from the U.S. Bureau of Labor Statistics can show us just how much employment, wages, and actual establishments in the restaurant industry have changed through Q4 of 2023. What data from the QCEW can also show is just how much more – or less – restaurant employment, wages, and establishments make up to a local area’s labor force or business makeup than the industry’s concentration for the nation as a whole.

In 2019, before the start of the COVID-19 pandemic, there were about 10 metro areas that had at least two of employment, wages, and establishments in restaurant industry that over-indexed compared to the country. After averaging these three measures, the restaurant industry in all of these metros is at least as about as prevalent in each as it is in the U.S. overall. Restaurants in Miami, Tampa, and in particular Honolulu have particularly impactful to the local economy.

While the restaurants were major economic factors in these cities in 2019, each region’s recovery from the COVID-19 pandemic has produced drastically different economic realities, on a variety of measures, for the industry to date.

Employment

Employment in the restaurant industry in U.S. generally crashed hard in the spring of 2020 with the estimated number of employees on payrolls in the industry nationwide declining almost 64% from April 2019 to April 2020. However, recovery from this massive shock has been relatively steady, despite a blip during the winter of 2020-2021, as employment has improved to hover between 3.5% and 2.5% below 2019 levels through most of 2023.

That said, restaurant employment in Tampa, Miami, and Dallas have already shot past 2019 levels, with the latter having payroll employment an estimated 4% higher in December 2023 compared to four years prior. These three metros have seen a similar tail-off in their employment recoveries as the U.S. overall, but either did not lose as many restaurant workers in the initial COVID-19 wave in the spring of 2020, recovered more in massive employment boom in the summer of 2021, or both.

Compare these metros to Honolulu and San Francisco where restaurant employment as of the end of 2023 still lags well over 10% below 2019 levels. Aside from Los Angeles no other metro is even close in how much the restaurant labor market has stagnated in these metros, with trends in the last quarter of 2023 not pointing towards new growth to close that gap.

Wages

Wages for workers are another important indicator of how the restaurant industry is faring. What’s important to note is that overall, the average weekly wage for restaurant industry workers in every one of these metro areas – as well as the U.S. overall – have tracked higher than inflation since 2020. This has mirrored an overall trend in the country where workers generally but especially lower-wage workers such as those in the leisure and hospitality and retail trade sectors have seen the highest wage growth in the recovery from the COVID-19 pandemic. In fact, restaurant industry workers overall made over 9% more per week in Q4 2023 than they did in Q4 2019, even after adjusting for inflation.

That said, the distribution of how much more restaurant workers are making varies widely by each of these metro areas. In Miami and Tampa real (inflation-adjusted) average weekly wages were over 17% more by the end of 2023 than they were in 2019, in New York and San Francisco those gains were only about 3%. The nominal (not inflation-adjusted) average weekly wage of a restaurant worker in Miami was $527 in Q4 of 2019 and $724 in Q4 of 2023. The change for workers in the same industry over the time period in New York City was from $648 to $790.

Establishments

Of course, the total number of businesses open is another massive indicator of how well economically an industry is doing. Throughout the country, there were about 5% more restaurant establishments open throughout 2023 than there was in 2019. Much of this business growth for restaurants nationally was achieved with the help of the approximately $931 billion dollars the U.S. Small Business Administration government agency distributed in pandemic relief funds. These were mainly administered through programs like the Paycheck Protection Program (PPP), Economic Injury Disaster Loans (EIDL), and Restaurant Revitalization Fund, the latter of which specifically went to keep restaurants open and in business throughout the pandemic.

That said, the difference in restaurant establishments open in 2019 and 2023 could not be more stark when comparing some restaurant industry significant metros against others. Tampa, Miami, Dallas, Honolulu, and especially Atlanta have at least 5.5% more restaurant establishments open today compared to four years ago. Conversely NYC and Boston metro areas have less than 1% more establishments open in 2023 than in 2019 and San Diego, Los Angeles, and especially San Francisco have fewer. There was an average of about 4,450 restaurant establishments in the Atlanta MSA in 2019 compared to 5,167 in 2023. In the SF MSA, that number has dropped from 5,189 to about 4,912 in the same four years.

Spending

Much of the economic activity that effects employment, wages, and business establishments being open generally is governed in some way by demand. Spending data for restaurants specifically that is both publicly available and somewhat up-to-date is difficult to find, but the folks at Opportunity Insights have been distributing some data from Affinity Solutions to capture consumer spending across a variety of industries compared to a pre-pandemic seasonally-adjusted base period of January & February 2020. While they do not provide data for the restaurant industry specifically, they do for the accommodation and food services sector which includes restaurants as well as other businesses that provide lodging or short-term accommodations for travelers, vacationers, and others.

According to Opportunity Insights data, accommodation and food services spending in the U.S. is tracking at about 12% above pre-pandemic levels as of June 2024 and has been solidly above pre-pandemic averages since about three years prior. While this is a great sign for the restaurant industry generally, there is still a divergence in spending recovery between metro areas that have a big restaurant presence. In Honolulu spending in accommodation and food services is up over 22% from its pre-pandemic figures, and in Miami, the somewhat more seasonally cyclical figures are at 14.8% more. However, in NYC spending on accommodation and food services surpassed pre-pandemic levels only for a time in 2022 and summer 2023 and now sits about 3% below four years ago. LA, San Diego, and SF have never recovered from the COVID-19 induced accommodation and food services disruptions and currently sit at about 7.5%, 7.8% and 18% below pre-pandemic levels, respectively.

GDP

For a broader look at the economic picture of the industry, the Bureau of Economic Analysis (BEA) releases Gross Domestic Product (GDP) data that can provide a picture of the overall monetary value of the goods and services produced in the industry for each metro area. Unfortunately, the BEA GDP data is again only for the accommodation and food services sector and is only available on the MSA level through 2022. Despite that, it still provides only further evidence of the economic split between MSAs with substantive restaurant industries since the pandemic.

From 2017 to 2019, annual GDP growth in the accommodation and food services sector averaged between 4.5% and 6% in Boston, San Francisco, New York, and Honolulu, while growth in Miami and Tampa hovered around 2% and Dallas actually had GDP decline during that two year period. However, either the pandemic disruption from 2019 to 2020 hit the restaurant industries in this first set of metro areas much harder or they experienced much slower growth coming out of it from 2020 to 2022 compared to the second set of metros.

This explains why some of the metros with high accommodation and food services GDP growth in 2020 to 2022 have overshot their relatively lower pre-pandemic trends compared to metro areas that have seen more GDP stagnation in their recovery from COVID-19 like San Francisco or were impacted even more acutely in 2020 like NYC and Honolulu.

Inflation

The other major economic reality of the recovery from COVID-19 pandemic recession is that although the U.S. has not experienced the deleterious impacts of high unemployment and slow earnings that have been characteristic of previous recession recoveries, there has been a major uptick in inflation throughout the economy and particularly in shelter and non-housing services, such as restaurants. Total average annual inflation growth from April 2019 to 2024 was about 4.2%, but for food away from home – the BLS Consumer Price Index for generally eating out – it was 5.2% for the same period.

Most MSAs saw a substantial rise in food away from home prices since before the pandemic, with every city between the low end of 4.4% average annual growth in prices in Tampa to 6.6% in Boston.

General Trend

So where does this leave the restaurant industry in each city? Taken together there seems to be an outline for two discernible groups. The first has higher restaurant employment, wage, and business growth than the U.S. with a strong spending and a positive GDP trend and includes Miami, Tampa and to a lesser extent Atlanta and Dallas. The second had either more intense COVID-19 restaurant disruptions, weaker restaurant growth since 2020, or both that has put a drag on employment, wages, businesses and knocked GDP off the pre-pandemic growth trend. These metros include San Francisco, New York, Boston, and to a lesser extent Los Angeles. Honolulu and San Diego sit in the middle varying mixes of positive and negative trends split evenly across indicators.

Data and code underlying this article can be found here.