Restaurants' appetite for hiring almost disappears
In a typical year, the holiday season is hopping for Kiki and Paul Benson, owners of Kiki B’s restaurant and A Movable Feast catering.
Like many in America, Kiki Benson expects this holiday season to anything but typical.
“The economy has never been as challenging for the restaurant industry,” said Benson, who opened her business in a church kitchen in 1994. “Food costs have been going up all year, labor costs, energy costs, and every time you turn on the TV, you have financial experts telling people you can save $4,000 a year if you stop going out to lunch.”
Benson has about 45 employees and doesn’t expect to add any by the end of the year. Last year, she tried some television advertising to build her clientele, but this year she’s watching her budget closely.
Benson is like a lot of business owners in the Rock River Valley. The latest Rock River Valley Economic Index, compiled quarterly by Northern Illinois University and sponsored by the Rockford Register Star, shows expectations for the fourth quarter of 2008 to be the weakest since 2001, when the country was in its last recession.
NIU surveys business owners in the retail, service and manufacturing industries.
It’s not hard to see why owners are worried. The jobless rate in the Rock River Valley reached 9.5 percent in August, its highest level since 1992. The housing market, which led us into the decline, has shown few signs of picking up steam. Some of the biggest names in the financial world failed or had to be saved by the federal government in September, sending the stock markets into a steep decline — which failed to slow even after Congress passed a $700 billion “economic stabilization” plan.
Still, Benson hopes the winter will be better than her projections. “I am an optimist at heart. I believe customers will return to dining out. People will tire of being overly frugal. And dining out is one of life’s little luxuries.”
For the third straight quarter, more owners of service-sector businesses expected revenues to decline, 26 percent, than those expecting increases, 21 percent.
The hiring trend was a little brighter, with 17 percent of owners planning to hire and 9 percent planning to cut back. But in the fourth quarter of 2006, 32 percent were hiring and none was laying off.
The revenue responses mark the first time in the index’s history that more expected declines rather than gains for three straight quarters. It is especially remarkable considering that it is common for busy families to hire house cleaners for the holidays or the have carpets cleaned for the winter, and businesses to schedule end-of-year events.
Of the two sides of Benson’s business, the retail restaurant side and service-oriented catering side, she’s more concerned about the catering.
“There’s psychology in play. People are saying ‘We’re in a recession, we probably shouldn’t be throwing a party for 100.’ The corporate parties are still going to happen. It’s the social gatherings that are going to be scaled back.”
The Thanksgiving-to-Christmas season is make-or-break time for many retailers, but only 36 percent expect sales to increase in the fourth quarter, while 45 percent expect a decline. That’s the first time more expect sales to fall instead of rise in a fourth quarter since 2001. And for the second straight quarter, no retailers are expecting to add workers.
Dave Hernandez, though, believes sales will take their traditional fourth-quarter turn upward. Hernandez opened a store in Roscoe, Direct Value Furniture, three months ago after spending the prior 12 years as a distributor for a fabrics-protection company.
“Furniture sales go both ways,” said Hernandez, who has two employees in a 4,800-square-foot store on Elevator Road. “When the housing market is good, you have people moving a lot and wanting new furniture for the new surroundings. When houses aren’t selling, a lot of people will decide to remodel or finish projects.”
Still, he understands that the economic picture today is much different from when he opened, even if it was just three months ago.
“A lot of people have been saying it was brave to open now,” he said. “Honestly, I think it’s the best time. The economy is going to come back at some point, and if you work hard and are honest, you’ll come out of this fine.”
If there is a bright spot in the economic landscape, it is the manufacturing sector, which makes up more than 28 percent of the area’s gross domestic product, according to the U.S. Bureau of Economic Analysis.
The number of companies expecting to ramp up production this quarter outnumbered those facing cutbacks, 33 percent to 22 percent. Business owners, though, are still bearish on hiring, with 11 percent looking to add workers and 17 percent expecting to shed them.
This economic downturn has been a strange one. Typically in the Rock River Valley, tough times hit the area’s blue-collar workers first.
“I haven’t seen a real downturn. Business is off about 10 percent, but I’ve got jobs lined up through the first quarter,” said Andrew Jones, owner of J.J. Precision Grinding, a one-person shop in Roscoe. Jones does grinding work for several companies in industries ranging from aerospace to automotive.
Jones, who has been in manufacturing for 25 years and owned his own shop for 10, said the weak dollar has helped companies increase their exports, stabilizing the industry.
“I believe a lot of the work done here is going overseas, but everything trickles down. If people aren’t out there spending and credit is tight, eventually it’s going to hit manufacturing.”
Alex Gary can be reached firstname.lastname@example.org or (815) 987-1339.