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The Landscape of Labor in Leisure and Hospitality

Macro Minute
March 28, 2023

Will strong hiring continue in the leisure and hospitality industry? It seems like there's additional room for significant hiring to occur, but a few data sources may be showing signs that hiring in the industry could be on the verge of slowing.

Leisure and hospitality (L&H) businesses hired over 100,000 workers in February, according to the Bureau of Labor Statistics, making it the only industry to break the six-figure mark. It also seems like these businesses have room to grow further: L&H payrolls are still lower than their pre-pandemic levels, in contrast to nonfarm payrolls in other industries which, in total, have recovered and surpassed their February 2020 levels.

Furthermore, L&H payrolls are 9.5 percent below the pre-pandemic trend, which assumes that growth would have continued at 2010-2019 rates had the pandemic not occurred. In contrast, non-L&H payrolls are less than 2 percent below their pre-pandemic trend, as seen in Figure 1 below.

Figure 1: Leisure and Hospitality Payrolls Remain Below Pre-Pandemic Levels

Chart comparing leisure and hospitality payrolls before and after the pandemic.

Source: Bureau of Labor Statistics via Haver Analytics

Despite strong hiring over the past year, demand for workers still appears to be high among L&H firms: As of January, there were 1.7 million open positions in the industry, up 67 percent versus 2019 average levels. Job openings are also elevated versus pre-COVID-19 levels outside of L&H, though relatively less so: Non-L&H job postings totaled 9.2 million as of January, up 48.6 percent versus 2019 average levels, as seen in Figure 2 below.

Figure 2: Job Openings in Leisure and Hospitality Versus Other Industries

Chart showing job opening in leisure and hospitality versus other industries..

Source: Bureau of Labor Statistics via Haver Analytics

However, it's getting harder to fill these openings: The ratio of hires per job opening fell to 0.71 in January 2023 compared to 1.21 in January 2020, a decline of 50 basis points. In comparison, the ratio of hires per job opening in non-L&H industries fell to 0.57 in January 2023 compared to 0.78 in January 2020, a smaller decline of 21 basis points. (See Figure 3 below.)

Figure 3: Hires-Per-Job Opening in Leisure and Hospitality Versus Other Industries

Chart showing hires-per-job opening in leisure and hospitality versus other industries.

Source: Bureau of Labor Statistics via Haver Analytics

There are signs that L&H employers are feeling less stressed about their staffing levels, which could possibly be a precursor to slower hiring ahead. Wage growth in the industry has fallen to pre-pandemic levels after a year of unusually rapid wage increases. Furthermore, after seven straight quarters where quarter-over-quarter growth in L&H wages and salaries surpassed the overall average, L&H wage growth fell below the overall average in the latest quarter of data, as seen in Figure 4 below. If L&H employers were feeling desperate for workers, they would still be increasing wages rapidly relative to other industries to attract job applicants.

Figure 4: Employer Cost Indexes: Wages and Salaries in Leisure and Hospitality Versus Total Private Industries

Chart showing wages and salaries in leisure and hospitality versus total private industries.

Source: Bureau of Labor Statistics via Haver Analytics

Furthermore, alternative high-frequency job postings data from Indeed are picking up a decline in L&H job postings that has yet to be seen in the official JOLTS series, as shown in Figure 5 below. We could be seeing a shift in hiring sentiment in L&H: Employers could be becoming more cautious as they revise their expectations about the overall economy or, following a year of labor shortages, may have increased automation or changed business practices toward less labor-intensive models.

Figure 5: Indeed Versus JOLTS Job Postings in Leisure and Hospitality

Chart showing Indeed versus JOLTS job postings in leisure and hospitality.

Source: Author’s calculations using Bureau of Labor Statistics via Haver Analytics and Indeed Hiring Lab data


Views expressed in this article are those of the author and not necessarily those of the Federal Reserve Bank of Richmond or the Federal Reserve System.

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