Restaurant unemployment rate falls to 7.5% in September

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 disappear anytime soon.

Food services and drinking places added just 29,000 new jobs in September, according to the Department of Labor’s report released Friday. The overall unemployment rate fell to 4.8% during the month, and nonfarm payrolls only increased by 194,000, falling short of estimates.

The lack of willing workers has pushed bar and restaurant owners to cut their operating hours, raise wages and offer better benefits to attract and retain employees. This summer, for the first time, wages for restaurant workers surpassed $15 an 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 plenty of applicants for a Penn Station location. 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 withdrew 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 has found that the cutting the benefits early had little impact on hiring challenges. For the remaining 24 states, the extra funding ended Sept. 4.

An August report from Snagajob and industry tracker Black Box Intelligence provided four different explanations for restaurants’ hiring woes: dissatisfaction with wages and benefits, lack of child care, better opportunities in other industries and mental 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 the experience Ruiz was looking for live in cities like San Francisco or Oakland, not the neighboring suburbs, it was already a limited hiring pool. But on top of that, he said he thinks many bartenders and restaurant workers took stock of their lives during lockdown.

“People are now thinking…