Twenty percent of Americans work in retail stores or in businesses that provide accommodations (hotels, etc.) and food services (restaurants and bars). That 20% is greater than the number of Americans working in manufacturing (8.9%), or finance (4.7%), or health care (11.3%), or government (15.4%). A few other fast facts on this sizable part of the American workforce:
- Most importantly, that 20% ratio has been remarkably constant since at least 1990. The average over the last 30 years is 19.6% with just a 0.4-point standard deviation in the monthly workforce percentage, even with all the cyclical ups and downs in this timeframe. The implication here is that employers and workers may both view many positions in these industries as relatively similar in terms of skills required and compensation provided.
- Breaking down the 20%: at the end of 2019, 10.3% of Americans worked in retail and 9.4% worked in accommodation/food service. The split was 15% in accommodation and 85% in food service and drinking establishments.
- The COVID Crisis has hit both sectors especially hard; of the 14.2 million total positions lost from December 2019 to June 2020 in all sectors of the US economy, 5.1 million (36%) have been in retail and accommodation/food service.
The important question now is just how many of these 5 million jobs can come back and over what sort of timeframe; in order to answer that we need to look at the long-term employment trends for each industry.
First, let’s look at retail. Here is the percent of the US workforce employed in this sector back to 1990:
Three points here:
- The downward trend is what you’d expect to see, from 12.1% in 1990 to 10.4% today, and the acceleration of job losses from 2013 onward also makes sense given the growth in online retail.
- Still, even recently 1 in 10 Americans still draws a paycheck from a physical retail store. Given the ongoing troubles at many brick and mortar retailers, we assume this percentage will continue to decline.
- If the trend from 2015 – 2018 of losing 0.2 points/year of US workforce representation holds for the next 5 years, retail will employ 1.5 million fewer workers in 2025 than in 2019.
Takeaway: the COVID Crisis accelerated the shift to online shopping, and reduced employment in retail stores will likely displace 1-2 million workers permanently in the coming few years.
Now, let’s move on to accommodation/food service. Here is the percent of the US workforce working in hotels, restaurants and bars:
Three points here:
- The growth in these positions over the last decade had some economic commentators calling the post-Great Recession period “the bartender’s recovery”.
- It’s easy enough to see why: from 2009 to 2017 some 3 million people went to work in accommodation/food service and drinking establishments. And remember the split is 85% to the latter 2 classifications.
- The question now is “how many hotel, restaurant and bar jobs will there be until there is a COVID vaccine?” As of June 2020, the number was 10.5 million (7.6% of the workforce). Look at the chart again, and you’ll see that was the percentage throughout the 1990s. We are not, in other words, in uncharted waters even at current depressed levels of employment in these industries.
Takeaway: the accommodations/food service industries will remain challenged for the foreseeable future and that means roughly 4 million positions will remain vacant.
Pulling this analysis together to draw a conclusion:
- Retail and accommodations/food service have collectively been a stable source of jobs for +30 years. As storefront retail jobs disappeared over the last decade, the hospitality industry happened to hit a growth spurt that provided incremental employment opportunities.
- The COVID Crisis simultaneously did material damage to brick and mortar retail AND hospitality, which means that until hotels, restaurants and bars can operate at full capacity there will be 5-6 million unemployed workers (using the math from the points above).
- The open question in our minds is “how many restaurants and bars can the American economy even support for the next 2-3 years, and by extension how many jobs can there be in these establishments?” We remember the 1990s vividly, and there did not seem to be a shortage of places to eat or drink or spend the night. And yet, somehow 2% of the entire US workforce has migrated to the hospitality industry since the go-go 90s…
Bottom line: there is a very specific cyclical component to a post-COVID US labor market recovery, namely in seeing the travel and hospitality industries recover to their 2019 levels. Headline unemployment data will vary based on macro issues like labor force participation but reanimating the American job market to its former state is a much more micro challenge. In short, we need another “bartender’s recovery”.