Leisure and Hospitality Pay Surges to a Record. Now Will Workers Come?

Hotels, restaurants and other businesses are boosting pay as they try to rebuild their staffs and meet increasing demand from Americans ready to venture out as pandemic-related restrictions are lifted and more people are vaccinated.

But it is unclear if the increases will be sufficient to entice enough workers back to close the employment gap remaining in the sector hit hardest by COVID-19 job losses.

Average hourly earnings for workers in leisure and hospitality rose to $18.09 in May, the highest ever and up 5% from January alone, according to Labor Department data released Friday. Pay rose even faster for workers in non-manager roles, who saw earnings rise by 7.2% from January, far outpacing any other sector. That higher pay could be a sign that companies are lifting wages as they seek to draw people back to work after more than a year at home. Some businesses are struggling to keep up with higher demand as more consumers, now fully vaccinated, get back to flying, staying in hotels and dining indoors. Job gains in leisure and hospitality this year have so far outpaced gains in other sectors.

But it is too soon to know if the boost will be enough to help speed up hiring at a time when many workers are still facing other obstacles, including health concerns and having to care for children and other relatives. Some 2.5 million people said they were prevented from looking for work in May because of the pandemic, according to the Labor Department.

Employment in leisure and hospitality is still in a deep hole when compared to pre-pandemic levels.

The industry added 292,000 jobs in May, with about two-thirds of that hiring happening in restaurants and bars. But overall employment is still down 2.5 million jobs, or 15% from pre-pandemic levels, more than any other industry.

If job gains continued at the pace seen in May, it would take more than eight months to replace the jobs lost. And it's not yet clear that all of the jobs will be recovered, especially if business travel remains depressed or if other habits change after the pandemic.

Some Republicans and businesses struggling to find workers say generous unemployment benefits are slowing down the labor market recovery by making it easier for workers to stay home. Supporters of the benefits say they are helping workers cover the bills while they wait for schools and child care centers to reopen, receive vaccinations and search for jobs that are a good fit.

Either way, any frictions caused by unemployment benefits may be resolved over the next several months as those benefits are reduced. About half of states are putting an early end to a $300 federal supplement to weekly unemployment benefits, winding them down as soon as June 12. The supplement expires nationwide on Sept. 6.