Deschutes County’s Accommodation and Food Services Heroic (Almost) ComebackJanuary 20, 2022 It is no surprise that the hardest hit businesses by job losses during the pandemic have been restaurants and hotels. These were the businesses most directly impacted by the shutdowns early in the pandemic and even after indoor dining returned there remained occupancy limits, consumer unease, and numerous waves of the virus.
Those early shutdowns led to a 50% drop in total employment for these restaurants and hotels, roughly 5,300 jobs lost in Deschutes County. We didn’t stay at the bottom long. In fact, by July 2020 the industry was only down around 17% from 2019 levels.
The industry lost a little momentum last winter with another wave of the virus but quickly rebounded again in the spring and summer of 2021. The most recent monthly estimate for Deschutes County’s accommodation and food services in November 2021 has employment levels up 2% above 2019 levels.
I would be cautious to characterize that as a complete recovery since the industry was running around 4% above 2019 levels before the onset of the pandemic. But these monthly estimates reveal an industry that is nearly recovered from a 50% drop in employment in roughly 20 months. Very impressive.
Now, these monthly estimates are subject to revision and tend to be a little volatile. If instead we focused on the lagging but far more accurate payroll tax records, we see that the recovery may be running just a little slower than initially estimated through September 2021. These recently released payroll records reveal that restaurant and hotel employment was running around 5% below 2019 levels as of September, whereas those monthly estimates through September were showing employment levels down only 3.7%. Regardless of which indicator you look at, the story is pretty similar. It has been a very impressive recovery for the broad sector, which will likely see a complete recovery sometime in 2022.
The value of looking at these payroll records is that we can dig deeper into the industry and look at different business types. With stories of restaurants continuing to close around the region and the ongoing struggle to find workers, it makes you wonder where this recovery is coming from. The table below highlights employment changes between September 2019 (pre-COVID) and September 2021 (most recent payroll data) in the different businesses types under the “accommodation and food services” umbrella.
A few observations. Outdoor (food carts aka mobile food services) and drive-thru/fast food (limited service restaurants) have done particularly well the past few years with notable job growth. This makes sense with fewer people wanting to eat indoors. We also see that coffee shops have done well too (snack and nonalcoholic beverages). Bars and other drinking places are basically back to pre-pandemic levels.
Hotels have clawed back a significant portion of the jobs lost, but employment remains down 7.3% from September 2019 levels. Based on the trends from Transient Room Taxes we know that overnight visitation has rebounded in Central Oregon, which means that Airbnb and other short-term rentals are likely filling the gap that remains with hotels.
The one sector that really stands out is full-service restaurants, which is still down over 600 jobs (-12.7%). I don’t know if this is because customers still don’t feel as comfortable going to indoor dining or if workers don’t feel comfortable working in that setting (or a little of both). These full-service restaurants have clawed back a significant portion of lost jobs, but that momentum stalled this last summer.
Despite employment remaining below the previous peak, these accommodation and food services businesses are having a hard time finding workers. Why is it so difficult to fill these lower-wage jobs? This is a question being asked across the country and there is no simple answer.
Many workers are finding better career opportunities (pay, scheduling, flexibility, etc.) with the high demand for labor we have now. In these instances, low-wage businesses tend to get the short end of the stick since they can’t match the wages being offered in other industries. We know that industry job hopping accelerated into other non-leisure jobs. Check out my research here where we tracked accommodation and food services workers in Oregon over the last 18 months. This analysis will be updated in the next month, but the big takeaway is that more than 20% (~37,000) of the accommodation and food services workers who remained employed in Oregon shifted their industry of highest earnings to a different industry. This was a 2.5 percentage point increase from a more typical year. To put it another way, at least one out of five workers had left the hotel and restaurant sector for a different industry.
Another factor contributing to the difficulty in hiring is competition with other businesses. The total number of job ads in the accommodation and food services industry are up 96% from pre-COVID levels, yet employment is only down around 5%. This is a good sign that businesses are hiring, but they are trying to do it at a much faster pace than the labor force is growing. These elevated levels of hiring demand give significant hope for a full employment recovery in 2022 but also means we will likely continue to see a very tight labor market in this sector.