The restaurant industry’s unemployment rate fell to 7.5% in September but remains well above pre-pandemic levels, providing another worrying sign that the labor crunch isn’t going to end anytime soon.
Food services and drinking places added just 29,000 new jobs in September, according to a Department of Labor report released Friday. The overall unemployment rate fell to 4.8% during the month, and nonfarm payrolls increased by just 194,000, falling short of estimates.
“Today’s jobs numbers are another red flag that industry rebuilding has reversed in recent months,” the National Restaurant Association’s top lobbyist Sean Kennedy said in a statement. “In the face of economy-wide struggles to hire, restaurant employment levels were essentially unchanged between July and September.”
The lack of willing workers has pushed bar and restaurant owners to cut their opening hours, raise wages and offer more benefits to attract and retain employees. This summer, for the first time, wages for restaurant workers surpassed $15 per hour, according to the Bureau of Labor Statistics. Hourly pay for leisure and hospitality jobs rose to $18.95 in September, up 10 cents from the prior month.
“There is no doubt that hiring is the number one challenge that our franchisees are seeing,” said Craig Dunaway, president of the regional sandwich chain Penn Station East Coast Subs, which primarily operates in the Midwest. “The federal minimum wage is virtually nonexistent right now.”
Dunaway estimates that the chain’s restaurants are roughly 30% understaffed, on average.
Before the pandemic, a “Now Hiring” sign in the window or a single posting on an online job board was enough to attract applicants. According to Dunaway, franchisees are now using multiple recruitment websites like Indeed or ZipRecruiter to find workers.
Many business owners and lawmakers have pointed their fingers at the higher unemployment benefits given during the pandemic as the culprit for the labor crunch. Twenty-six states pulled out early from the federal unemployment program in the hopes of pushing people to return to work.
“I had numerous franchisees tell me that their employees said that they could make the about the same amount of money staying at home,” Dunaway said.
However, research shows that the cutting the benefits early had little impact on hiring challenges. For the remaining 24 states, the extra funding ended Sept. 4.