The restaurant industry lost 18,200 jobs last month, according to new government data, as closures due to Hurricane Florence likely put a halt to a years-long surge in hiring.
But the industry is still facing increasingly difficult shortages of labor, as the overall economy added 134,000 jobs last month and the unemployment rate fell to 3.7%—the lowest unemployment rate in almost 50 years.
Restaurants added 237,900 jobs over the past year despite the decline in September, which when added with new jobs in other industries such as ride-sharing companies have contributed to a labor crunch that is driving up wages.
Wages in the leisure and hospitality sector rose 3.9% year-over-year in September. By comparison, wages for all jobs rose 2.8%.
Dean Haskell, partner with the Denver-based National Retail Concept Partners, estimates that the higher wages and benefits have cost the industry $460 million since the start of 2017. And he said that restaurants paid more in labor in the first half of this year than in all of 2017.
And he said that attracting and retaining quality talent has become a major factor in whether a restaurant can generate sales.
“If you can attract and retain good talent, you will drive sales,” Haskell said.
Hiring challenges have already led to rising labor costs for many restaurant companies this year. And the oncoming holiday shopping season is expected to make matters worse as retailers, which compete with restaurants for workers, expect to hire even more employees in the coming months to meet expected shopping demand.
One of the biggest challenges for the industry is the declining teen workforce. The number of people ages 16 to 19 who are employed has declined over the past year—by 157,000, according to federal data.
To be sure, the unemployment rate among teens remains high, 19.3%. But that’s down from 22% a year ago.
Teens have traditionally been a primary source of employees in the restaurant business. Fewer teens in the workforce has contributed to the challenges many restaurant companies are having in filling positions.
Hurricane Florence made landfall in the Carolinas last month, doing an estimated $38 billion in damage and causing at least 48 fatalities. Severe weather can have a notable impact on restaurants because they close during and after the storm, which leads to losses of jobs that are recovered later on as the locations reopen and people return to work.