ADP: Franchise Job Growth Slows
Restaurants had been going on a hiring binge of late, leading to rapid growth in the number of new franchise jobs, but in July that growth seems to have slowed considerably, according to the most recent ADP National Franchise Report.
Franchises added 12,300 jobs last month, less than half the number of jobs they added in June, when franchises employed an additional 27,910 people. But look more deeply at the numbers and it's easy to see why: restaurants didn't add nearly the number of employees they had been adding.
In June, restaurants added 21,010 jobs. In May they added 17,590 jobs. In July? That number fell to just 2,980.
To be sure, that still led franchise sectors—next highest, for instance, was business services, which added 2,010 employees. Auto parts and dealers added 1,680 jobs, but professional services employment declined by 1,620. Manufacturing was the only other industry to see a decline, losing just 20 jobs.
In short, the franchise sector appears to be healthy, but its leading industry, restaurants, suddenly appears to be putting the brakes on hiring. One theory: restaurant sales slowed dramatically this summer, beginning in June, and that likely kept many franchisees from hiring additional workers. If sales are lower, after all, franchisees have fewer reasons to bring on more workers. The lower sales might have also put a damper on recovery expectations. And at least part of the reason restaurants had been hiring was based on a belief that the economy is on the upswing.
One additional theory: Obamacare. The Patient Protection and Affordability Act is supposed to go into effect next year, and some believe restaurants had hired additional part-time workers while reducing their number of hours in preparation for oncoming demands that they provide health insurance. Workers who work fewer than 30 hours are considered full-time under the act, and employers are thus supposed to provide them coverage, lest they face $2,000 fines. Some franchisees might have reduced work hours below 30, then brought on more workers to fill the gap in demand.
But the government recently gave employers a one-year reprieve from those penalties. And so restaurants might have slowed their preparations. In any event, they certainly weren't going to add any more workers when sales were falling.