Covid shrank the restaurant industry. That's not changing anytime soon
CNN.com - Top Stories / 2023-02-27 18:169
It's never been easy to operate a restaurant, and in recent years it's been even harder.

In 2020, Covid restrictions ground the nation's bustling restaurant industry to a halt. Since then, there have been significant signs of a rebound: Dining rooms have reopened and customers have returned to cafes, fine-dining establishments and fast food joints.

But there are fewer US restaurants today than in 2019. It's not clear when —if ever — they're coming back.

Last year, there were about 631,000 restaurants in the United States, according to data from Technomic, a restaurant research firm. That's roughly 72,000 fewer than in 2019, when there were 703,000 restaurants in the country.

That number could fall even further this year, to about 630,000 locations, according to Technomic, which doesn't foresee the number of restaurants in the US returning to pre-Covid levels even by 2026.


Sit-down restaurants, especially, are at a disadvantage as delivery and takeout remain popular. And with inflation still high, some potential customers are avoiding restaurants to save money. Meanwhile, restaurant operators are seeing their own costs, like rent and ingredients, rise, and say it's hard to hire staff.

With conditions so tough, some restaurant owners are advising newcomers to steer clear of the industry altogether.

If someone were to ask David Nayfeld, chef and co-owner of the San Francisco restaurants Che Fico and Che Fico Alimentari, whether to open a new restaurant right now, his answer would be no.

"I would say it is not a good time to go open a restaurant if you are not a seasoned and incredibly durable operator," he said. Especially now, when restaurant operators need experience and deep pockets in order to succeed, he added.

Even Nayfeld, himself an industry veteran who has worked at the famed Eleven Madison Park, is struggling. The pandemic led to "a really devastating few years that we're still working our way out of," he said.

Some have argued that the contraction is a painful but necessary correction.

"The narrative back pre-pandemic was that we were over-saturated … too many restaurants chasing too few consumer dollars," said David Henkes, senior principal at Technomic.


Indeed, before the pandemic, the number of restaurants was growing between half a percent and one percent each year, he said, adding that the recent decline served to "reset" the size of the market. Without those hurdles, however, that decrease would likely have happened more slowly, he noted.

Daniel Jacobs, a chef and restaurant owner, has seen his own network of restaurants shrink over the past few years.

Prior to the pandemic, he and his business partner Dan Van Rite operated three restaurants and a bakery, plus a catering operation and restaurant consulting business. Today, they are left with two Milwaukee restaurants, DanDan and EsterEv.

"Closing a restaurant is an incredibly difficult decision to make," Jacobs said. "We did our best during the pandemic to try and keep our teams together … at some point, you just gotta call it."


The rise of takeout and delivery during the pandemic helped multiple restaurants survive the pandemic.

DanDan, a Chinese American restaurant, had offered takeout for years. The restaurant "had that customer confidence that we were going to deliver quality products," he said.

EsterEv is a tasting-menu-only restaurant within a restaurant (functionally, a dining room located inside DanDan) open only on weekends, and "definitely wouldn't have [made it] if we had to pay rent on a space," Jacobs said.

The trend toward delivery and takeout has stuck, with restaurants reporting higher levels of off-premise orders. According to Revenue Management Solutions, a restaurant consultancy, delivery was up 11.4% in fast food and fast casual restaurants in January compared to last year.

"We increasingly like to get our food on the go," said David Portalatin, food service industry advisor for the NPD Group, a market research firm. "We're still a more home-centric society."

Plus, sit-down restaurants tend to be more expensive, which could drive cash-strapped customers away, said Portalatin. Even with rising grocery prices, eating at home is generally less expensive than dining out, and restaurants last year saw their foot traffic dip.

Full-service restaurants are also more labor intensive. That's a problem right now, as restaurant owners report having a hard time hiring staff.

Job openings in accommodation and food services rose by 409,000 in December, the largest increase by sector for the month, the Bureau of Labor Statistics said in February.

Demand for workers marks a turnaround from early in the pandemic, when restaurants let go of millions of staffers. Some employees also left of their own volition during the pandemic, afraid of getting sick with Covid-19 or tired of dealing with grueling conditions and rude customers.


Today, some of those workers haven't returned, leaving operators struggling to restaff.

"Fundamentally, the labor situation is one where … there's just not enough supply of qualified workers," Henkes said. "And restaurants are particularly vulnerable, because it's never been the industry of choice for a lot of people."

Some restaurants, Henkes said, "are very cognizant that they need to improve the working experience and what they're offering to employees," he said. "But doing that at scale for an industry is very hard."

And, of course, some major employers are not interested in higher wages for workers.

Chipotle, Starbucks, Chick-fil-A, McDonald's and KFC-owner Yum Brands, for example, have each donated $1 million to Save Local Restaurants, a coalition opposing a California law that could set minimum wage up to $22 an hour and codify working conditions for fast-food employees in the state.

Enviado do meu Galaxy

Stellantis invests $155 million in Argentine copper mine
por Reuters

Investing.com: Stock Market News / 2023-02-27 18:24



© Reuters. FILE PHOTO: The logo of Stellantis, the world's fourth-largest automaker which starts trading in Milan and Paris after Fiat Chrysler and Peugeot maker PSA finalised their merger, is seen on a flag at the main entrance of FCA Mirafiori plant in Turin, Ital
ROME (Reuters) - Carmaker Stellantis said on Monday it had invested $155 million to buy a minority stake in a copper mine in Argentina as part of its global push to secure raw materials for electric vehicle batteries.

The company acquired a 14.2% stake in McEwen Copper, a subsidiary of Canada's McEwen Mining (NYSE:MUX), which owns the Los Azules project in Argentina.

The $155-million investment will make Stellantis the second-largest shareholder in McEwen Copper along with Rio Tinto (NYSE:RIO), it said in a statement.

Los Azules plans to produce 100,000 tons per year of cathode copper, a key component for car batteries, at 99.9% purity starting in 2027, the carmaker said.

Stellantis, the world's third-largest automotive group by sales, includes Italy's Fiat and Alfa Romeo, France's Peugeot (OTC:PUGOY) and Citroen, and U.S brands Jeep and Ram.

The group wants 100% of its European passenger carsales and 50% of its U.S. passenger car and light-duty trucksales to be battery electric vehicles by 2030.

In recent months, Stellantis has struck a series of accords to procure raw materials for electric batteries, including last month's nickel sulphate supply deal with Finland's Terrafame.

Enviado do meu Galaxy

China's local state is on the verge of a debt crisis
The Economist: Finance and economics / 2023-02-27 18:28144
From several kilometres away China 117 Tower, the world's sixth-tallest skyscraper, is an extraordinary sight—rivalling anything Dubai, Hong Kong or New York has to offer. On closer inspection, however, the building in Tianjin is revealed to be an eyesore of epic proportions. Construction on "117", as locals call it, was never completed. Large sections remain unfinished; patches of the tower's concrete skeleton are exposed to the outside world. Instead of becoming a magnet for business and wealth, it has been repelling prosperity for years. Other derelict towers surround the building, forming a graveyard of a central business district. Local officials would hide the entire area if they could.

Tales of extravagantly wasteful spending have circulated in China for years, as cities and provinces accumulated debts to build infrastructure and boost the country's gdp. These debts have reached extraordinary levels—and the bill is now arriving. Borrowing often sits in local-government-financing vehicles (lgfvs), firms set up by officials to dodge rules which restrict their ability to borrow. These entities' outstanding bonds reached 13.6trn yuan ($2trn), or about 40% of China's corporate-bond market, at the end of last year. Lending through opaque, unofficial channels means, in reality, debts are much higher. An estimate in 2020 suggested a figure of nearly 50trn yuan.

Borrowing on this scale appeared unsustainable even during China's era of rapid growth. But disastrous policymaking has pushed local governments to the brink, and after the rush of reopening the long-term outlook for Chinese growth is lower. The country's zero-covid policy hurt consumption, cut factory output and forced cities and provinces to spend hundreds of billions of yuan on testing and quarantine facilities. Meanwhile, a property crisis last year led to a 50% fall in land sales, on which local governments rely for revenue. Although both problems are now easing—with zero-covid abandoned and property rules loosened—a disastrous chain of events may have been set in motion. About a third of local authorities are struggling to make payments on debts, according to a recent survey. The distress threatens government services, and is already provoking protests. Defaults could bring chaos to China's bond markets.

To make ends meet, local governments have entered costlier and murkier corners of the market. More than half of outstanding lgfv bonds are now unrated, the highest share since 2013, according to Michael Chang of cgs-cimb, a broker. Many lgfvs can no longer issue bonds in China's domestic market or refinance maturing ones. Payouts on bonds exceeded money brought in from new issuances in the final three months of 2022, for the first time in four years. To avoid defaults many are now looking to informal channels of borrowing—often referred to as "hidden debt" because it is difficult for auditors to work out just how much is owed. Interest on these debts is much higher and repayment terms shorter than those in the bond market. Other officials have gone offshore. lgfvs last year issued a record $39.5bn in dollar-denominated bonds, on which many are now paying coupons of more than 7%.


These higher rates have the makings of a crisis. A report by Allen Feng and Logan Wright of Rhodium, a research firm, estimates that 109 local governments out of 319 surveyed are struggling to pay interest on debts, let alone pay down principals. For this group of local authorities, interest accounts for at least 10% of spending, a dangerously high level. In Tianjin, the figure is 30%. The city, home to almost 14m people and on China's prosperous east coast, is a leading candidate to be the default that kicks off a market panic. Although Tianjin neighbours Beijing, its financial situation is akin to places in far-flung western and south-western provinces. At least 1.7m people have left the city since 2019, a scale of outflows that resembles those from rust-belt provinces. Dismal income from land sales can only cover about 20% of the city's short-term lgfv liabilities.

Across China, pressure on local budgets is starting to be felt. On February 23rd a private bus company in the city of Shangqiu, in Henan province, said it would suspend services owing to a lack of government financial support. Several others elsewhere have said the same. Cuts to health-care benefits have prompted protests in cities including Dalian and Wuhan, where they were met with a heavy police presence. Local governments have struggled to pay private firms for covid-related bills such as testing equipment. In places, they are also failing to pay migrant workers, which has led to more protests.

Some local governments have started to sell assets to try to avoid defaults. A recent loosening of rules on stock exchanges could help localities raise capital from the public through listings. Governments could also start hocking assets in private transactions. It is unclear, though, how far officials are willing to go, or who will buy the assets on offer. A new business district in Tianjin appears to have many of the hallmarks of success, for instance—not least several rows of sparkling new towers and a Porsche dealership across the street. But most of the shops on the ground floor of the project, which is jointly owned by a local-government company and a private firm, are empty. Local officials have started to auction off individual floors. One such sale recently ended without a buyer.

The central government is transferring funds to localities on a grander scale than ever before. More than 30trn yuan was made available between 2020 and 2022, according to Messrs Feng and Wright. An lgfv in the city of Zunyi, in the indebted south-western province of Guizhou, recently agreed with local banks to lower interest rates, defer principal payments for ten years and extend the maturity of its debt to 20 years. Such arrangements could become more common in future. Proponents argue that they indicate a genuine willingness on the part of local officials to pay their debts, and are an acknowledgement that it will simply take more time than expected.

But ever-growing debt over the past decade suggests that many projects will never become truly profitable, says Jack Yuan of Moody's, a ratings agency. The troubled lgfv in Zunyi, for instance, has had negative cash flows since 2016, and seems to have little hope of a turnaround. As Rhodium's analysts ask, if these governments could not make payments when local gdp growth was high, often over 7%, how will they manage in the forthcoming decade, with growth of perhaps 3%? ■

Enviado do meu Galaxy

The Role of Immigration in U.S. Labor Market Tightness
por Evgeniya A. Duzhak

Federal Reserve Bank of San Francisco: FRBSF Economic Letter / 2023-02-27 18:3160


Immigration has traditionally provided an important contribution to the U.S. labor force. The flow of immigrants into the United States began to slow in 2017 due to various government policies, then declined further due to border closures in 2020–21 associated with the COVID-19 pandemic. This decline in immigration has had a notable effect on the share of immigrants in the U.S. labor force. For instance, Peri and Zaiour (2022) estimate that the pandemic led to 2 million fewer foreign working-age people in 2021 relative to the pre-2019 trend. More recent data from November 2022 show a significant pickup in immigration flows, narrowing this shortfall and returning numbers to the pre-pandemic level.

This Economic Letter explores the impact of recent changes to immigration flows on the labor market. I assess the labor market using the vacancy-to-unemployment (V–U) ratio, which is a well-known measure of the degree of labor market tightness, with a higher V–U ratio indicating a tighter labor market (Barnichon and Shapiro 2022). While gradual inflows of immigrants into the United States have historically tended to loosen labor markets, the sharp drop in immigration between 2017 and 2021 helped fuel a strong tightening in labor market conditions. I find that slowing immigration led to a 5.5 percentage point increase in the V–U ratio over this period. Data for 2022 show a strong rebound in immigration that has helped offset tight U.S. labor markets by contributing a 6 percentage point reduction in the V–U ratio.

Labor market tightness and its contributing factors
One way to measure the strength of the labor market is to compare the number of vacant positions employers would like to fill to the number of people looking for jobs. An elevated vacancy-to-unemployment (V–U) ratio indicates a tight labor market in which jobs are plentiful and unemployed workers are scarce.

The V–U ratio can vary for many reasons, such as overall economic activity or changes in technology that result in jobs being automated. In this Letter, I focus on the impact of the size of the labor force, that is, on the supply of workers. In particular, new entrants into the labor force can lower the V–U ratio by either filling open positions or joining the ranks of the unemployed looking for work.

A central force for expanding the labor force is a growing population. This occurs through either natural increases—more domestic births than deaths—or through more immigrants arriving than the number of people leaving the country. U.S. domestic-born population growth has slowed in recent years through low fertility rates and the aging of the baby-boom generation. Figure 1 shows the contributions to annual growth in the U.S. population from natural increases (blue bars) and net international migration (green bars). Net international migration (NIM) accounts for both immigration and emigration between the United States and the rest of the world.

Figure 1
Annual U.S. population change, 2015–22


Source: Author's calculations using national population projections from U.S. Census Bureau.

Recent population growth changed dramatically. Whereas the foreign-born population grew 1.6% per year on average in the decade leading up to 2017, growth slowed to 0.45% per year in 2018 and 2019 before coming to nearly a complete stop in 2020. NIM then picked up in 2021 before a substantial rebound in 2022.

Role of immigration in population and labor force growth
Immigrants contribute to the U.S. economy through the supply of labor as well as through entrepreneurship. Entrepreneurs increase the demand for labor by creating job vacancies and therefore increasing labor tightness (Azoulay et al. 2022). However, the primary way recent entrants affect the U.S. labor market is by increasing labor supply, since they are more likely to work than demand labor services.

Much of the pre-COVID decline in immigration can be attributed to immigration policies enacted after January 2017. Over the course of four years, 472 executive actions were aimed at transforming the U.S. immigration system (Bolter, Israel, and Pierce 2022). These actions ranged broadly from increasing immigration enforcement to temporarily freezing refugee admissions and moving away from family immigration through the Reforming American Immigration for Strong Employment (RAISE) Act. Following these immigration policies, NIM fell significantly. Between 2016 and 2019 the number of new permanent residents dropped 13% and the number of student (F1) visas issued declined 23%. Nevertheless, these policies turned out to have a relatively modest impact compared with the border closures used as a pandemic mitigation strategy.

The overall impact of these policies and the pandemic can be seen by comparing the actual working-age foreign-born population and labor force with the level predicted by the average growth trend for 2010–16. Panel A of Figure 2 shows that the growth in the foreign-born working-age population slowed down such that, just before the pandemic, it was about 1.5 million people below what would have been predicted by its trend growth. This gap widened to 2 million people by the end of 2021, a shortfall noted by Peri and Zaiour (2022). Since then, however, immigration has rebounded, nearly closing the population gap with its pre-pandemic trend by the end of 2022.

Figure 2
Foreign-born worker contributions and pre-2017 trends


Source: Current Population Survey (CPS) and author's calculations. Series are calculated as monthly rates using CPS data, with the trends based on growth from January 2010 to December 2016.

To get a better understanding of how these changes have impacted the U.S. labor market, I also look at growth in the number of foreign-born individuals in the labor force, which measures people working or looking for work. I again assess the gap between the actual number of foreign-born individuals in the labor force relative to the level predicted by its 2010–16 trend. Panel B of Figure 2 shows that the overall pattern for the foreign-born labor force relative to its trend is broadly similar to that of the foreign-born working-age population, albeit with an even stronger recovery: the shortfall in the foreign-born labor force closed by the middle of 2022.

Connection between immigration and labor tightness
To explore the impact of immigration on labor markets, I examine variation in the V–U ratio and NIM across states. Most U.S. states have experienced a notable increase in the V–U ratio in recent years. As native-born worker migration rates across states have declined in recent decades (see Kerns-D'Amore, Marshall, and McKenzie 2022), foreign-born workers have been filling gaps in local labor markets. Furthermore, Cadena and Kovak (2016) show that low-skilled immigrants are more likely than native workers to travel to states with higher demand for labor. Similarly, one would expect that foreign-born workers would respond more than native workers to rising labor demand in states that typically attract more immigrants and have an above-average share of foreign-born population.

However, despite tightening labor markets and increased labor demand across the United States between 2017 and 2019, NIM was down in all but six states. In fact, most regions that gained immigrants have relatively low shares of foreign-born population. These states generally do not display a strong change in V–U ratios from changes in immigration flows because immigrants make up a smaller share of their local labor markets. In contrast, states with an above-average concentration of immigrants have a negative relationship between changes in NIM and the V–U ratio, such that the V–U ratio falls as the NIM rises. Therefore, states with a higher proportion of foreign-born workers typically experience stronger labor market tightening after a decline in NIM.

To more precisely estimate the effects of changes in NIM on labor market tightness, I use the differences in immigration rates across states and over time. I estimate the impact of changing NIM flows on labor tightness across states using the annual Job Openings and Labor Turnover Survey and American Community Survey state data from 2006 to 2021. I measure changes in NIM relative to a state's resident population in 2000. Regression analysis indicates that higher NIM is associated with lower labor tightness. This highlights the effects of both decreasing immigration, where fewer foreign-born workers enter the labor market, and rising emigration of foreign-born workers out of state.

In addition, Figure 3 reports the average contribution of changes in NIM to the tightening in local labor markets. Positive values indicate that, on average, lower NIM increased labor market tightness. Prior to immigration policy changes beginning in 2017, NIM was increasing, thereby lowering the V–U ratio, albeit by a small amount. Slower immigration during 2017–20 contributed to an average increase in V–U. Pandemic-related policies led to an unprecedented drop in NIM at the same time as a sharp decrease in the V–U ratio when many businesses closed. As a result, declines in NIM in 2020 increased the V–U ratio about 5 percentage points, offsetting some of the reduction due to direct pandemic effects on the labor market. Subsequently, a strong immigration surge in 2022 led to an outsized increase in NIM. This helped alleviate some of the labor market tightness: according to regression estimates, the increase in NIM brought the V–U ratio down almost 6 percentage points, somewhat offsetting an overall increase in the ratio in 2022.

Figure 3
Net immigration contributions to changes in V-U ratio


Source: Author's calculations using data from Bureau of Labor Statistics and U.S. Census Bureau.

However, while variations in NIM impact labor market conditions, their average contributions to changes in the V–U ratio were relatively muted in most years. The exception is 2019, when the decline in NIM accounted for roughly a quarter of the small rise in the V–U ratio. 

Conclusion
Immigration policies enacted after January 2017 contributed to the decline in immigration prior to the sharp drop due to the COVID-19 border closures. Lower net international migration led to a slowdown in the foreign-born population and labor force growth. This contributed to the tightening in the U.S. labor market. Reopening of borders in 2022 and easing of immigration policies brought a sizable immigration rebound, which in turn helped alleviate the shortage of workers relative to job vacancies. The foreign-born labor force grew rapidly in 2022, closing the labor force gap created by the pandemic. This analysis suggests that, if the pickup in immigration flows continues, it could further ease overall labor market tightness, albeit by a modest amount.

Evgeniya A. Duzhak
Regional Policy Economist, Economic Research Department, Federal Reserve Bank of San Francisco

References
Azoulay, Pierre, Benjamin F. Jones, J. Daniel Kim, and Javier Miranda. 2022. "Immigration and Entrepreneurship in the United States." American Economic Review: Insights 4(1), pp. 71–88.

Barnichon, Regis, and Adam Shapiro. 2022. "What's the Best Measure of Economic Slack?" FRBSF Economic Letter 2022-04 (February 22).

Bolter, Jessica, Emma Israel, and Sarah Pierce. 2022. Four Years of Profound Change: Immigration Policy during the Trump Presidency. Washington, DC: Migration Policy Institute.

Cadena, Brian C., and Brian K. Kovak. 2016. "Immigrants Equilibrate Local Labor Markets: Evidence from the Great Recession." American Economic Journal: Applied Economics 8(1), pp. 257–290.

Kristin Kerns-D'Amore, Joey Marshall, and Brian McKenzie. 2022. "Pandemic Did Not Disrupt Decline in Rate of People Moving." U.S. Census Bureau, America Counts: Stories Behind the Numbers, March 7.

Peri, Giovanni, and Reem Zaiour. 2022. "Labor Shortages and the Immigration Shortfall." EconoFact, January 11.

Opinions expressed in FRBSF Economic Letter do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System. This publication is edited by Anita Todd and Karen Barnes. Permission to reprint must be obtained in writing.

Enviado do meu Galaxy