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The Outlook for NYC Restaurants and Workers Remains Bleak Despite Indoor Dining’s Return

Trump’s rush to nominate a justice to the Supreme Court will likely delay a stimulus deal until after the election

President Donald Trump
| Photo by MANDEL NGAN/AFP via Getty Images

The COVID-19-hammered hospitality industry will have to keep waiting federal help. Politics are to blame. A rush by Republicans and President Donald Trump to fill ex-Justice Ruth Bader Ginsburg’s Supreme Court seat will almost certainly delay further fiscal stimulus — the type of aid designed to prevent thousands of restaurants from closing and keep millions of ex-staffers out of poverty. In fact, any assistance might not arrive until after the election, White House senior advisor Jared Kushner recently told CNBC. This political reality is a particularly tough break for New York City venues, especially as new economic and health policy developments foretell a punishing fall and winter to come.

Here’s the TL;DR: Local food service hiring slowed dramatically in August, a setback for staffers scraping by on bare-bones unemployment benefits. Also: More and more restaurants can’t pay rent; consumer spending is poised for further slowdowns; and even though the return of indoor dining will help — if it doesn’t lead to more infections — vaccine prospects don’t bode well for lifting dining restrictions anytime soon.

This is precisely the type of environment where one would expect federal aid to ease the pain, be it through enhanced jobless aid, revenue replacement, or another round of Paycheck Protection loans. None of that assistance appears imminent now, especially as Congress shifts its pre-election focus toward the historic battle over filling the Supreme Court seat left vacant by the death of Justice Ginsburg last Friday.

Also worth noting is that while chief White House economist Larry Kudlow called for a deal on restaurant and small business aid this week, he added that the U.S. is in a “self-sustaining, strong v-shaped recovery” that’s not “contingent” on another relief package. Kudlow’s statements couldn’t be more divorced from reality, especially as the country continues to see a marked downturn in jobs growth — and as the virus continues to infect around 40,000 new people every day.

On the local level in New York City, recent developments on economic and public health fronts paint an even dimmer picture for restaurant workers and owners.

Local hiring has dramatically slowed in food services

Bars and restaurants added the fewest new jobs last month since the pandemic began, dropping to a sluggish 8.9 percent growth rate in August, down from the 20 percent range in June and July, according to new state data.

That deceleration in hiring means that any of the city’s 150,000 ex-hospitality staffers — roughly half the industry — will have a much tougher time finding a job. Without better unemployment assistance, those hard-working folks will risk bankruptcy, increased debt loads, food insecurity, and threatened evictions down the line. Could indoor dining help with this situation. Yes, but…

Indoor dining will only marginally help restaurants and workers

As New York’s outdoor dining program loses a bit of its cachet as the weather turns cooler, more will turn to indoor dining, which is inherently risky from a disease transmission perspective, per Centers for Disease Control and Prevention guidelines. But here, let’s look at the economics of it: Indoor dining begins at 25 percent capacity next week, which means a restaurant with 36 seats will only be able to accommodate nine customers at a time. Such limited service won’t translate into big gains in either revenues or hiring. Throughout the rest of the state, where indoor dining at half-capacity has been in effect for over two months, the industry is still only at about 72 percent of pre-pandemic employment, according to Eater estimates.

If the restaurant community across the state still suffers from Depression-era jobless rates, things will be much worse in the city where capacity is even lower, given that many folks are still working from home in the suburbs, and because new HVAC requirements for restaurants might be crushingly expensive. Indoor dining, in other words, is far from a panacea; in fact, it could be just the opposite if it precedes another uptick in infections and further layoffs. And that’s a big problem because…

Trump’s enhanced jobless aid is too limited in scope and funding

Over 1 million New York State residents were unemployed in August. New York City’s jobless rate is improving at a steady clip, but it still remains at 16.3 percent, nearly double the national rate, with Bronx unemployment at 21 percent, the state labor department announced yesterday. For these throngs of jobless folks, unemployment means subsisting on austere state benefits that often pay less than minimum wage of $15/hour.

Now there is some good news here: Many of those workers started receiving a $300 weekly supplement as part of President Donald Trump’s Lost Wages Assistance program. That means a jobless cook earning the city average salary of $35,050 would end up earning the hourly equivalent of $15.92 after combining Trump’s program with state benefits. That’s higher than the city’s minimum wage, but only barely, and it’s still less than the living wage one needs to afford rent and buy basic living supplies. Additionally, the supplement only lasts up to six weeks, though people who lost their jobs after the first week of September won’t qualify for anything at all.

Literally everything is holding back restaurant spending

Culturally, the bar and restaurant shutdown forced New Yorkers to adapt to eating more meals in their apartments. Epidemiologically, eating at home or ordering takeout has and likely will remain strong options as wary consumers and critics heed the advice of White House Coronavirus Task Force member Dr. Anthony Fauci, who says he’s avoiding eating at restaurants altogether. Financially, a combination of massive job losses, flat wage growth nationwide in August, and diminished prospects for stimulus checks means that diners have less disposable income than before to spend $17 on coconut yogurt at brunch.

New York will always have its rich diners, but a populace suffering from 16 percent unemployment — many of whom are still likely traumatized from seeing tens of thousands of their fellow residents die — isn’t exactly the dry powder one needs for strong restaurant spending. That reality, combined with a theater community that won’t come back until January and an opera company that won’t return until next fall, will be doubly worse since restaurant sales tend to peak around the wintertime holiday season.

The restaurant rent crisis could turn nuclear

Only 20 percent of bars, nightclubs, and restaurants could pay their full rent in June, according to a survey of over 500 restaurants by the New York City Hospitality Alliance, a trade group that advocates on behalf of business owners. By August, that figure declined to 13 percent. What’s so telling about these data is that one would have expected precisely the opposite: New York City restaurants were largely closed for outdoor service earlier in the summer. One could at least partly attribute the reversal in fortune to restaurants exhausting their forgivable Paycheck Protection Program loans, which were only designed to last about two months; the need for additional help has, of course, lasted much longer.

If this trend continues, it will eventually cascade throughout the city’s larger economy, threatening landlords and banks. And even though Gov. Andrew Cuomo has imposed an indefinite moratorium on commercial evictions, restaurants are still shuttering in droves because of the crushing financial obligations that will come due when protections are lifted.

Vaccine prospects don’t bode well for looser capacity restrictions

The head of the CDC said last week that a vaccine wouldn’t be broadly available to the U.S. population until the spring or summer of 2021. And while health care workers would likely be prioritized in any early rollout, there hasn’t been much talk about fast-tracking waiters, cooks, or diners interested in enjoying three-hour tasting menus in tiny rooms. What’s more is that the vaccine will only be required to prevent disease in 50 percent of those who are inoculated.

With all that in mind, restrictions at restaurants could extend well into next year or longer. And while many of those restrictions are justifiable — some could even be tighter — they will translate to more workers remaining unemployed for six-months or longer. Cuomo hasn’t even announced a timeline or series of benchmarks for when restaurants will be able to expand past 50 percent capacity. In short, things won’t go back to normal anytime soon, which means that hospitality industry will need help for some time yet.

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