Consumer Spending Enlivens San Francisco, But Labor Shortage Blunts Recovery Pace

Signs of life in San Francisco’s commercial districts hint at economic adaptation to a new post-pandemic normal, however, labor force losses mean a full recovery could take years.

Aggregated data released by the S.F. Chamber of Commerce shows consumer spending is only 10% below pre-pandemic levels, according to a statement. This is following a 44% drop in expenditures at the onset of pandemic-related economic restrictions last year and coincides with the loosening of rules over the past month from Purple Tier to Orange Tier, and an increasing percentage of the population being vaccinated.

In March, restaurants increased to 25% indoor seating capacity and a matter of weeks later increased to 50%, with social distancing protocols still in effect. This is in addition to outdoor seating bolstered by the city’s Shared Spaces program, making it easier for businesses like restaurants to serve customers in areas carved out on sidewalks.

“The Shared Spaces is critical,” said Golden Gate Restaurant Association Executive Director Laurie Thomas, who also owns two restaurants in the city. “I can tell you personally without it, we would be closed. There would be 50 people out of work.”

Thomas said her restaurants are at about 75% to 80% of pre-pandemic staffing levels though at reduced hours, but that hiring has been a challenge. Those currently applying lack the experience and qualifications seen in the past, she said. This has resulted in increased pressure on existing staff and a risk of losing them, which Thomas said has prompted raises for several positions.

In general, S.F. restaurants are struggling to find qualified chefs, Thomas said. She cited the shutdown in December as the decisive blow to the labor market, more so than the four-to-six-month period following the March 2020 shutdown when there were still ample people seeking work.

Other hard-hit industries like entertainment are also experiencing growth with the relaxing of rules on April 15, allowing indoor live music to recommence, according to S.F. Chamber of Commerce interim Public Policy Director Emily Abraham. Chamber President Rodney Fong said he thinks that the struggling small-business community has reasons to be optimistic though the coronavirus fight is far from over.

“Many business leaders have begun talking about a ‘post-pandemic boom' and based on the information we’ve been seeing, it doesn’t seem far-fetched to think that this will begin as San Francisco continues to make great strides in moving down the COVID-19 restriction tiers,” Fong said in a statement.

S.F.’s unemployment rate dropped from its peak in April 2020 to 5.7% in February with March job postings only 5% below pre-pandemic, both positive indicators for future consumer spending, the chamber concluded in a statement. The city’s entertainment sector had especially taken a hit, with job postings dropping by 68% last year. However, as of March, postings for entertainment jobs are only 13% below pre-pandemic levels.

“With over a year of shuttered venues, Another Planet is beyond excited to be able to bring back live music to San Francisco,” Another Planet Entertainment Concert and Festivals President Allen Scott said in a statement. “Live entertainment is a staple of our city, and each dollar spent going to a show translates into $12 spent in surrounding areas. However, it is a long road to recovery, and as we prepare to reopen, we look to our government leaders for continued support.”

The long road to recovery could lead as far out as 2025, Abraham said. This is largely due to the diminished labor force during the height of the coronavirus pandemic, with many workers filing for unemployment, moving to other cities or going to work in other industries less impacted by restrictions.

“It will take some time to bounce back and especially for the live music industry,” Abraham said. “Some restrictions have been lifted so they can have indoor performances. They're not an industry that can just open their doors up right away, so it takes a lot of time to build back that staff to be able to operate at reduced capacity.”

The consumer spending boost is happening in other parts of the Bay Area as well. First Guardian Group CEO Paul Getty said that restaurants in Menlo Park and Palo Alto have been packed with people releasing tension from over a year of cabin fever. However, Getty said his associates in the restaurant industry in those cities are also having a tough time attracting workers and expects it will take about two years for the labor force to recover.

“Restaurants typically hire minimum wage workers who get tips, and a lot of those service workers have left the state, and they're not going to easily come back to a situation where they're going to pay three to four times the amount of rent that they're paying where they've moved to,” Getty said. “I think it's going to be really difficult, you're going to see a significant labor crunch, and with that, I think wages are going to have to rise significantly above the minimum wage to attract people to come back and to be able to afford to live here.”

In addition to instituting raises, Thomas said her restaurant managers have broadened their hiring approach shifting to posting jobs on Instagram and other social media, a method yielding promising results over the past week.

Thomas said that more federal small-business assistance funding should help the restaurant industry survive the summer months, but she said she is concerned about what will happen this fall when the money stops coming.

“We have to watch the downtown area closely because many can't open their businesses and are still paying rent,” Thomas said.

The move to Orange Tier means that offices are now allowed to open at 25% capacity, resulting in an uptick in foot traffic in the downtown area. However, it is still not enough to ensure that restaurants can stay afloat.

“Right now, we're working with the city. We were advocating for San Francisco, especially in meeting these restrictions. We want to be as in line with the state as possible,” Abraham said. “We don't want to discourage anyone from coming back to San Francisco.”