Overall, Oregon businesses are on the verge of fully recovering all jobs lost from the COVID-19 pandemic recession. As of June 2022, total nonfarm employment levels were only 0.9 percent below the previous peak.
However, when looking over the recovery by industry, we see a fairly large disparity. For some industries, employment is now far higher than pre-pandemic levels, such as construction (transportation, warehousing and utilities), real estate (rental, and leasing) and professional and technical services. Meanwhile other industries remain below their previous peak, such as educational services, leisure and hospitality, local government and other services.
These disparate trends are not surprising. The pandemic recession was not an equal opportunity offender. The largest job losses were concentrated in restaurants, hotels, tourism facilities, personal care services and education. Employment in accommodation and food services, the sector that includes hotels and restaurants, remains roughly 6 percent below the previous peak. The industry is sitting with 6,200 fewer jobs than before the pandemic, yet there were nearly 10,800 new unique job ads between April and June as these employers try to ramp back up.
Clearly the demand exists to lead the state’s accommodation and food services into a full recovery, but that recovery has been frustratingly slow for many employers with 77 percent of Oregon vacancies identified as difficult to fill this past spring. The most common response when businesses were asked why their vacancies were difficult to fill? A lack of applicants.
If these restaurants and hotels remain far from recovered and yet the demand for workers is high, it begs the question: where did all the restaurant and hotel workers who were working in the industry before the pandemic go?
To answer this question, we tracked the cohort of pre-COVID accommodation and food services workers (employed in the industry in the first quarter of 2020) through the end of 2021 using wage records and unemployment insurance claims. If an Oregon business reported payroll earnings for a worker or a worker was on an Oregon unemployment insurance claim, this worker showed up in our data. Unfortunately, we don’t know anything about those workers who dropped out of the labor force (retired, back to school, etc.) or moved outside the state.
Of the 181,700 workers who had a primary job in accommodation and food services before the pandemic in early 2020, roughly 45 percent were still employed in the industry by the end of 2021. To put it another way, more than half the workers churned out of the industry after almost two years. Churn or turnover is very common in this industry as it is highly seasonal, employs large numbers of young workers, and tends to offer lower-paying jobs on average. To get an idea about how normal the turnover was for this COVID-19 impacted cohort of restaurant and hotel workers, we looked back at a cohort of workers from early 2018 and tracked their employment patterns over the same amount of time.
The churn was high for this 2018 cohort of restaurant and hotel workers by the end of 2019, with only 52 percent of the workforce still primarily employed in a restaurant or hotel. Retention of these workers in the COVID-19 cohort was around 7 percentage points lower than our comparison cohort from 2018.
The first place to look for workers who left the industry is to check if they are still employed in Oregon, but in a different industry. Around 26 percent of the COVID-19 cohort of restaurant and hotel workers had moved their primary job to a different industry by the end of 2021, a higher share than 24 percent of the cohort from 2018. There was increased job-hopping into different industries during the pandemic.
The industries that received the most restaurant and hotel workers by the end of 2021 were retail trade (6.5 percent of the original cohort), professional and business services (+3.9 percent), health care and social assistance (+3.9 percent), and manufacturing (+2.3 percent). There are not a lot of patterns to draw from this changing industry. Industry hopping tends to be towards industries less impacted by pandemic closures, higher paying industries and less seasonal industries.
Those who left restaurant and hotel jobs to different industries during the pandemic only account for about one-third of the increased churn out of the industry compared with a more normal period of time. The other large difference in churn in this period is movement to an unemployment insurance claim.
In the fourth quarter of 2021, 7 percent of the COVID-19 cohort of restaurant and hotel workers claimed at least one week of unemployment insurance. This was a considerable increase over the 2 percent of the 2018 restaurant and hotel workforce on unemployment insurance. The higher share of restaurant and hotel workers on an unemployment insurance claim in fourth quarter 2021 explains roughly two-thirds of the drop-in retention compared with the 2018 cohort.
There are a couple of reasons why a higher share of COVID-19 impacted restaurant and hotel workers were claiming unemployment insurance nearly two years later. This COVID-19 cohort experienced mass layoffs in the spring of 2020. In late 2021, hiring demand waned modestly for restaurants and hotels due to the surging Delta variant.
Despite the massive layoff shock at the onset of the pandemic, it is still surprising to see 7 percent of the workforce claiming unemployment at a time when labor demand was high for these workers.
These counts don’t tell us the length of unemployment insurance claims, only that at least one week was claimed in fourth quarter 2021. It is possible that increased business failures, changes in ownership, and other reorganizations could affect the share of the workforce claiming unemployment insurance in the stretch between jobs after a layoff that occurred much later than the initial COVID-19 mass layoff events. Some of these claimants could have worked for a restaurant or hotel that closed or changed ownership in summer or fall 2021, and their claim would show up here. We don’t yet have complete data on business dynamics through 2021, but it has certainly been a tough time to be in the restaurant and hotel business, characterized by labor shortages, unsteady supply chains, and rapidly increasing business costs.
One thing we know for certain: By fourth quarter 2021, the expansion of unemployment insurance through the CARES act and other federal legislation expired. Workers who claimed unemployment in fourth quarter 2021 were no longer receiving the more generous weekly unemployment insurance benefits.
Around 78 percent of the pre-pandemic accommodation and food services workers have been accounted for by the end of 2021. There were those who remained employed in the industry (45 percent), those who are now employed in a different industry (26 percent) , and those who had an unemployment insurance claim (7 percent). The remaining 22 percent are no longer working a payroll job or claiming unemployment insurance in Oregon. They may be self-employed, working for a business outside of Oregon, retired, unemployed without unemployment insurance, in school, or out of the labor force for other reasons.
This may seem like a high share of workers unaccounted for, but the share is nearly identical to the 2018 cohort of restaurant and hotel workers who were not impacted by the pandemic. This helps put to rest the theory that there was an increasing share of labor force dropouts among these restaurant and hotel workers during the pandemic.
Why has it been difficult for restaurants and hotels to find workers? Much of the workforce left the industry. A higher share of workers moved to different industries compared with a more normal period during non-pandemic times. We also saw a higher share of these workers claiming unemployment insurance even after labor demand rebounded. Unemployed workers represent an opportunity for the many businesses trying to hire.
Looking for work is a prerequisite for gaining unemployment insurance, which means those folks on unemployment insurance were active job seekers. In fact, where we are today many of those workers have likely landed back in the workforce. The number of workers on an unemployment insurance claim in Oregon dropped 31 percent from the end of 2021 to June 2022.
This was an analysis of the existing workforce employed by a restaurant or hotel just before the pandemic. However, another potential contributing factor of the labor shortage faced by these businesses is the incoming workforce. With a high demand for labor across many industries, it is also possible that many workers entering the workforce (largely young people) who would typically find a job in a restaurant or hotel are finding work in different industries with more consistent hours and less seasonality.