Unemployment rate in restaurants drops to 7.5% in September

The unemployment rate in the restaurant industry fell to 7.5% in September, but remains well above pre-pandemic levels, providing another worrying sign that the labor shortage is not not going away anytime soon.

Food services and drinking places created just 29,000 new jobs in September, according to the Labor Ministry report released on Friday. The overall unemployment rate fell to 4.8% during the month, and non-farm wages rose only 194,000, below estimates.

“The number of jobs today is another red flag that the rebuilding of the industry has reversed in recent months,” National Restaurant Association lead lobbyist Sean Kennedy said in a statement to CNBC. “In the face of economy-wide hiring challenges, restaurant employment levels remained essentially unchanged between July and September.”

The lack of volunteer workers has prompted bar and restaurant owners to cut their hours of operation, increase wages, and offer better benefits to attract and retain employees. This summer, for the first time, restaurant employee salaries exceeded $ 15 an hour, according to the Bureau of Labor Statistics. Hourly wages for leisure and hospitality jobs reached $ 18.95 in September, up 10 cents from the previous month.

“There is no question that hiring is the number one challenge our franchisees face,” said Craig Dunaway, president of regional sandwich chain Penn Station East Coast Subs, which operates primarily in the Midwest. “The federal minimum wage is virtually non-existent right now.”

Dunaway estimates that the chain’s restaurants are on average about 30% understaffed.

Before the pandemic, a “Now Hiring” sign in the window or a single post on an online job site was enough to attract many applicants for a location at Penn Station. According to Dunaway, franchisees now use multiple recruiting sites like Indeed or ZipRecruiter to find workers.

Many business owners and lawmakers have blamed the higher unemployment benefits paid during the pandemic as the culprit for the labor shortage. Twenty-six states withdrew from the federal unemployment program prematurely in hopes of getting people back to work.

“Many franchisees have told me that their employees say they could make about the same amount of money by staying home,” Dunaway said.

However, research has shown that removing benefits early has little impact on hiring problems. For the remaining 24 states, additional funding ended on September 4.

An August report from Snagajob and industry tracker Black Box Intelligence provided four different explanations for restaurant hiring problems: dissatisfaction with wages and benefits, lack of childcare, better opportunities. in other industries and mental and physical health issues.

David Ruiz has struggled to find enough bartenders for his Stillwater restaurant in Fairfax, Calif., Which he co-owns with his wife. Considering that most of the bartenders with the experience Ruiz was looking for live in cities like San Francisco or Oakland, not neighboring suburbs, this was already a limited hiring pool. But on top of that, he said he believed many bartenders and restaurant workers took stock of their lives during the lockdown.

“People are now thinking, ‘Maybe you don’t have to work every night to make a living,’” Ruiz said. “I think it just changed everyone’s perspective.”

The labor shortage has put additional pressure on the rest of the workforce. Restaurant customers are frustrated with slow wait times or incorrect employee orders, which in turn can make quitting a more attractive option for those workers.

“It has created a negative cultural dynamic that I think is difficult for people to come out of when they are understaffed,” Dunaway said.

Starbucks workers at a handful of locations in Buffalo, New York, are looking to organize, which they say is in part due to the stress of chronic understaffing.

Historically, the restaurant industry has suffered from high turnover rates. Many workers don’t plan to stay at their job forever, instead using it as a stopover while studying or between other jobs to earn money. In 2019, the entire hospitality industry had a turnover rate of 78.9%, according to the BLS. The following year, this rate climbed to 130.7%.

Ruiz estimates that about half of the bartenders in the industry don’t plan to stay long anyway, while the other half typically have other interests or full-time jobs they could turn to for help. money during the pandemic.

Although the duration of the problem is still uncertain, restaurants are trying to determine its impact on their business and how to work around the problems. Dunaway expects the staff shortage will not be resolved until at least the first quarter of 2022, if not later.

For the biggest players in the industry, technology is a possible solution. Olive Garden’s parent company, Darden Restaurants, is using artificial intelligence to improve its customer traffic forecast, which will help make planning more efficient. McDonald’s is testing automated steering wheel controls at select Chicago restaurants.