Leisure and hospitality businesses are hiring a ton — and they’re paying people more – Business Insider

  • Leisure and hospitality added 343,000 payrolls in June, making up 40% of total job gains.
  • The June jobs report also showed higher wages for those workers, suggesting pay increases are helping hiring.
  • But wages in the sector are still recovering from the hit caused by the coronavirus recession.
  • See more stories on Insider’s business page.

The June jobs report added 850,000 payrolls, going beyond expectations as the economy continues to recover from the pandemic. A large chunk of the big jobs gain came from leisure and hospitality, and the reason for this likely comes down to higher wages.

Of the 850,000 payrolls added, leisure and hospitality made up 343,000 of them, or 40% of the total gain. Pay in the sector jumped 3.6% over the past three months, and the correlation between increased jobs and increased wages is suggesting that higher wages work. For the month of June, wages shot up 7.1% from a year ago, the biggest gain for any sector.

“The continued progress for the leisure and hospitality sector is excellent news. Continued payroll gains for these industries hit so hard by the pandemic is a sign that more workers can quickly return to work,” Nick Bunker, economic research director for jobs site Indeed, wrote in a statement. He added that 23% of gains added overall last month were from food services and drinking places.

Despite the fifth consecutive month of gains in the industry, leisure and hospitality is still 2.2 million jobs, or 12.9%, below pre-pandemic employment. However, Bunker told Insider that given the progress made in the industry, it looks like the pace of recovery is pretty quick.

Following the April jobs report that fell significantly below expectations, Insider reported that one of the possible reasons workers weren’t rushing back to work, despite a high number of job openings, was that they were holding out for higher wages. 

Around the same time, major companies including Costco and Target have raised their minimum wages to at least $15 an hour, putting pressure on other employers to follow suit. 

But, as Heidi Shierholz, a former Obama administration economist and now director of Policy at the Economic Policy Institute, pointed out on Twitter, wages for workers in leisure and hospitality “plummeted” last year during the recession , so even with the strong wage growth in those sectors this year, wages are not that much higher than if the pandemic had never happened. 

“Over the last three months, leisure & hospitality has added 977,000 jobs—well over half of the 1.7 million total jobs added over that period,” Shierholz wrote. She added that these numbers “are just not signaling a big labor shortage.”

In an attempt to remedy the labor shortage, GOP-led states have been ending unemployment benefits early under the argument the benefits are disincentivizing the return to work. But June’s jobs data were collected before some of the cuts went into effect, meaning benefits might not have been the problem, rather, low wages were.

Betsey Stevenson, another former economist for the Obama administration, wrote on Twitter that the solution to finding workers is simply offering a higher wage.

“So it turns out that you can find workers, you just have to pay a better wage than in the past because wages of low-wage workers are going up.”