The latest report from the Department of Labor for the week from March 21-28 is just in. The unemployment claim numbers are at an all-time high for the second week running at 6,648,000 seasonally adjusted initial claims. The labor department reports that most states attribute these numbers to layoffs led by the accommodation and food services sector.
In this post, we take a sectoral overview of accommodation and food services as an employer and see the unemployment scenario from its perspective. The coronavirus-induced economic slowdown has made the futures of thousands of chefs, bartenders, wait staff, baristas, etc. uncertain. Now, all these employees have been made eligible for Unemployment Insurance claims.
Profile Of Accommodation And Food Services Sector
According to the Bureau of Labor Statistics, this sector employed 14 million people in 2018. It showed an average unemployment rate of 5.4% over the last 4 months.
The top occupations in this sector are waiting or food service, food preparation, and cashiers. The largest number of employees are wait staff, followed by cooks. Employees earn an average hourly wage of $15.87. Many are employed and paid on an hourly basis in this sector.
The working hours’ number a minimum of 25 on average. Cooks may work much longer hours in a week.
COVID-19 Causes Unemployment in Accommodation And Food Services
This sector has reported the highest number of layoffs in the following states:
- Texas
- Michigan
- Illinois
- New York
- Indiana
- Wisconsin
- Virginia
- Iowa
- Missouri
- Tennessee
- Rhode Island
- Maine
- Alabama
- Georgia
The reason for this is the lockdown of hotels, restaurants, pubs, bars, etc. by the US government in light of these places being potential clusters. As this sector depends on very regular cash flow, it doesn’t have the nest egg that bigger conglomerates can gather. The impact of dropping sales is seen very quickly.
In turn, employment in related businesses such as hotel aggregators like Booking.com gets affected. Such businesses survive on commissions from their third party services between customers and providers of accommodation and food services.
The sector’s nature makes remote work impossible, forcing layoffs and furloughs. Americans are clearly following social distancing norms well.
Types Of Jobs Still Available
As you can see in our post on jobs that are still hiring, dining out took a huge hit, but meal delivery services survive and some are thriving. Pizza chains, take-out meal joints, etc. have scaled up hiring to deal with larger order volumes. A few restaurants have switched to offering delivered and take out meals and are thus surviving with the staff getting reduced wages.
The most common job roles will be in food preparation, delivery services, and stocking/inventory work. It will be very difficult to find more specialized and high paying job roles at this point in time.
Projections For The Future
If the coronavirus-triggered shutdowns continue for too long, worldwide recovery for this sector will be difficult. The growth of accommodation and food services as an employment generating sector was fueled in recent years by the general economic growth and the resulting rise in disposable incomes.
With many big employers having global supply chains, the worldwide economic shutdowns in response to coronavirus will cause losses everywhere. Another big driver of the growth of accommodation and food services is tourism which will surely fall due to job losses.
The American Hotel and Lodging Association says that the hotel sub-sector alone has had losses of over $5 billion. Making up the amounts to retroactively pay employees still on rolls when the economy revives, will be hard without a quick revival of global trade and supply chains.
The restaurant industry was facing labor charge pressures, spiraling rent costs and criticism about food wastage even before the pandemic. This is a good opportunity for corrective actions that go beyond merely restarting production and service.