Staff shortages in restaurants are holding back job recovery

Canada’s jobs data on Friday shows how far the country’s labor market has gone to fully recoup job losses from the pandemic, and how tough the home stretch could be.

While the economy added a solid 94,000 jobs in July, bringing employment down to less than 250,000 from pre-pandemic levels, the figures also show weaker-than-expected hiring in recently opened sectors like restaurants and hotels. There’s evidence that part of the problem is supply – many of these hard-hit businesses are struggling to find staff.

“Employers are having a hard time finding people who are willing and able to work,” Doug Porter, chief economist at Bank of Montreal, said by phone. “It’s more of a challenge than normal.”

It’s a paradox – labor shortages at a time of high unemployment rates – that has also been a feature of the US labor market recovery.

Nearly 30% of businesses reported unskilled or semi-skilled labor shortages, according to a July survey by the Canadian Federation of Independent Business. This is the highest level on record outside of October 2018.

Data from the Bank of Canada’s Summer Business Outlook Survey reveals similar issues, with the intensity of labor shortages at their highest level since the fourth quarter of 2018.

The problem seems to be more acute in restaurants.

According to the latest data from job posting service Indeed Canada, food service registrations are up 72% from pre-pandemic levels, suggesting strong demand for bartenders, helpers kitchen and waiters. But Friday’s jobs report shows the industry is far from a return to normal.

Accommodation and food service companies saw a gain of 35,000 jobs last month, below analysts’ expectations. The industry still accounts for nearly all of the jobs that have yet to recover from the pandemic, with employment still 20% lower than it was in February 2020. That compares to 1.3% for the economy as a whole.

Weak hospitality jobs “temper expectations of a return to pre-pandemic levels,” Toronto-Dominion Bank economist Sri Thanabalasingam said by phone.

Companies say they can’t find enough workers, blaming the long duration of closures that has forced many of their employees to seek other careers.

“How do you retain these people for so long when you’re not working at all?” Sarah Chown, managing partner of Metropolitan Brasserie in Ottawa, said in an interview. “That’s where I think you’re seeing more hiring struggles right now.”

Economists and others have offered a number of reasons for the shortage, including childcare issues, ongoing coronavirus concerns and expanded support benefits. According to Porter, the so-called hurdle wage for workers – or the appropriate level of compensation for the risk involved – is higher now than before due to COVID-19.

Most believe that these factors will subside in the coming months. While some economists are pushing back their forecasts for jobs to return to pre-pandemic levels, it’s only been a month or two – so far.

“I guess it will be three months before we and most others in the restaurant industry can open at full capacity again,” said Stephen Beckta, owner of Beckta and two other restaurants. Ottawa, in an interview.

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