Restaurants add only 29,000 new jobs in September, even as wages creep higher

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  • According to a Labor Department report released on Friday, 29,000 new jobs were added in eating places in September.
  • The restaurant industry’s unemployment rate of 7.5% is still well above pre-pandemic levels.
  • High turnover rates have also completely damaged the industry’s ability to staff restaurants.

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

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Food services and drinking places added just 29,000 new jobs in September, according to a Labor Department report released Friday. The overall unemployment rate fell to 4.8% during the month, and non-farm payrolls increased by only 194,000, well below estimates.

The lack of willing employees 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, wages for restaurant workers have exceeded $15 an hour, according to the Bureau of Labor Statistics. Hourly wages for leisure and hospitality jobs rose to $18.95 in September, up 10 cents from the previous month.

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“There’s no doubt that hiring is the number one challenge our franchisees are seeing,” said Craig Dunaway, president of Penn Station East Coast Subs, a regional sandwich chain that operates primarily in the Midwest. “The federal minimum wage is virtually nonexistent right now.”

Dunaway estimates that chain restaurants have an average of 30% fewer employees.

Before the pandemic, a “Now Hiring” sign in a window or a single posting on an online job board was enough to attract too many applicants for a Penn Station location. According to Dunaway, franchisees are now using multiple recruitment websites like Indeed or ZipRecruiter to find employees.

Many business owners and lawmakers have pointed their fingers at the high unemployment benefits offered as blame for the labor shortage during the pandemic. Twenty-six states quickly withdrew from the federal unemployment program in hopes of motivating people to return to work.

“I had several franchisees tell me that their employees said they could earn the same amount by staying at home,” Dunaway said.

However, research has found that cutting benefits too soon had little effect on the challenges of getting hired. Additional funding for the remaining 24 states ended on September 4.

An August report by Snagajob and industry tracker Black Box Intelligence provided four different explanations for the restaurant hiring woes: dissatisfaction with wages and benefits, a lack of child care, better opportunities in other industries, and mental health. and physical health concerns.

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

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

The labor shortage has put additional pressure on the remaining employees. Restaurant customers take their frustration out on slow wait times or wrong orders on staff, which in turn can leave more attractive options for those workers.

“It creates a negative cultural dynamic that I think is hard for people to get out of when there’s so little staff,” Dunaway said.

Starbucks workers at a handful of locations in Buffalo, New York, are seeking to unionize, which they say is straining an old understanding.

Historically, the restaurant industry has suffered from high turnover rates. Many employees do not plan to stay at their jobs forever, but instead use it to earn money while they are away from school or in between other jobs. According to the BLS, in 2019, the overall hospitality industry turnover rate was 78.9%. The following year, that rate increased to 130.7%.

Ruiz estimates that nearly half of bartenders in the industry don’t plan on sticking around for long anyway, while the other half usually have other interests or full-time jobs they can turn to for money during the pandemic.

While it’s still up in the air how long the problem will persist, restaurants are trying to determine how it will affect their business and how to intervene around the issues. Dunaway expects that the impasse won’t be resolved until at least the first quarter of 2022, if not later.

For the big players in the industry, technology is a potential solution. Olive Garden parent Darden Restaurants is using artificial intelligence to improve its forecast for customer traffic, which will help make scheduling more efficient. McDonald’s is testing automated drive-thru ordering at some Chicago restaurants.

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