As Economy Booms, Franchise Jobs Shrink
October 3rd, 2018
Employment at franchised establishments in the United States fell by 5,700 jobs at the same time other parts of the economy saw strong job growth in September.
The gains and losses from the past twelve months are also more volatile (see chart), with losses greater and peaks a little higher than the prior year.
Franchised restaurants saw a loss of 4,800 positions, while franchised hotels experienced a 1,600 job drop in September. Contrast that with employment at auto dealerships, which is a franchise sector known to provide employee benefits, healthcare and better-than-minimum-wage entry positions, which had an increase of 3,200 positions over the month before.
Mark Zandi, chief economist of Moody’s Analytics, pointed out in a conference call this morning that Amazon announced it was increasing its entry level wages to $15 per hour, which is more than double the federal minimum wage. “It is indicative of how tight this labor market is,” said Zandi.
He anticipates that this will put increasing pressure on employers that employ lower skilled workers to also raise their wages. “I fully anticipate wage growth accelerating as we move to 2019.”
While franchises struggle with hiring in a tight labor market, the U.S. economy overall continues to have wonderful news.
Economist Zandi added the caveat that the job report did not include empty positions caused by the evacuation of the Carolinas by Hurricane Florence. “ADP did not pick up Hurricane Florence,” said Zandi. He estimates between 25,000 to 30,000 jobs would need to be trimmed from September’s private sector employment figure. That still would leave the figure at or above 200,000 jobs, which is still a strong month.
Small businesses that have under 50 employees had a change of employment of 56,000 more jobs over last month. Most of those job additions were in service-providing small businesses.
“The job market continues to power forward,” said economist Zandi. “Employment gains are broad-based across industries and company sizes. At the current pace of job creation, unemployment will fall into the low 3 percent by this time next year.”