The World Cup Has Been Very Good for Bars and Restaurants
The World Cup likely provided a boost to demand in the United States over the past several weeks, one that might not be initially picked up in the official economic reports but will likely show up in revisions.
Bank of America looked at its aggregate debit card and credit card usage and found that retail activity was up across the 11 host cities. In the three weeks ending June 27, brick-and-mortar spending at restaurants and bars was up 5.3 percent in host cities and 3.8 percent in the rest of the country. That’s an important change because the host cities had lagged the non-hosts in the three weeks prior.
Importantly, this only captures spending by Americans because the data only covers U.S.-based customers. So all of the spending by foreigners likely came on top of that.
There may have been some offsetting. Boston was so overrun by Scottish fans that several of its largest bars nearly ran out of beer. But the Bank of America data show no increase in spending by Americans. International fans may have crowded out local fans in some places.
Analysts at Bank of America also calculated that occupancy up 0.4 percent in the U.S. and room rates up 9.2 percent year-over-year in the final week of June. The industry metric, revenue per available room, was up 9.6 percent. In the luxury category, it was up by an impressive 20.7 percent. Urban hotels—as opposed to resorts—saw a 16.7 percent year-over-year gain in revenue per available room, almost certainly driven by the World Cup.
This compares favorably to the three percent “revpar” gain in Europe, the 1.4 percent contraction in China, the 0.8 percent contraction in Asia outside of China, the 2.8 percent decline in the Middle East and Africa, and the 1.7 percent decline in the Caribbean. Whoever came up with the idea that anger over Trump tariffs or foreign policy would hurt U.S. tourism deserves at least a yellow card.
So Why Weren’t More People Hired?
One thing that has not happened, at last as far as the data show, is a hiring surge around the World Cup. There’s no real sign of rising hiring in hospitality and leisure in the May or June nonfarm payrolls data from the Department of Labor. Similarly, there’s nothing to indicate a significant hiring spree in the ADP data.
The most obvious explanation for this is one we’ve frequently returned to when analyzing “puzzling” data: low labor force growth amid low unemployment. With far fewer migrants arriving and an already low rate of unemployment, even a big pickup in demand doesn’t result in big payroll expansions. Instead, employers look to meet the excess demand through improved efficiency.
Some of the host cities have incredibly low unemployment rates, which makes it very hard to see any net increase in employment. Miami, for example, has a 2.6 percent unemployment rate. Kansas City’s is 3.5 percent. The Atlanta metro area is 3.4 percent. Boston is around four percent. Los Angeles still has an elevated unemployment rate, at 4.8 percent, but this is low for the area and the unique on-again, off-again working pace in entertainment.
In other words, the lack of a hiring surge is only puzzling if you are stuck in the mindset of the over-abundant labor and insufficient demand era. For decades, hiring and payroll growth turned on just one thing: demand for labor. There was always enough supply, and the question was just how many workers employers needed. Now it is more balanced, with pressure from both supply and demand. That’s good for workers, good for investment, and good for economic growth.
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