Business Closures not the Primary Driver of Deschutes County’s Accommodation and Food Services Job LossesJuly 21, 2021 When talking about industry employment we tend to focus on the high level numbers. How many workers are employed in that industry in a particular month or year? This high-line number does a great job at highlighting big picture trends, but you often lose some of the more nuanced trends underlying those numbers.
The first quarter 2021 payroll records recently became available. As of March 2021 there were 8,916 payroll employees in local restaurants and accommodations. That is roughly 1,700 fewer jobs than before the pandemic (-16%). These high-level employment numbers show we are a long way from full recovery. But the payroll employment figure doesn’t tell us where these losses are coming from or how individual establishments have been impacted by the pandemic.
There are two ways employment levels can change. The first way is through the creation of new establishments or the closure of existing establishments. This is what labor economists morbidly call the “birth/ death factor”. These openings and closures often make the big headlines, but typically are not the primary driver of employment trends for larger industries. The second way we see employment change is through expansion or contraction of existing establishments.
Where were the job losses in the accommodation and food services sector concentrated throughout the pandemic? Business closures or contraction?
First the birth/death impacts. Of the 561 establishments that reported employment in February 2020, 87 of them stopped reporting employment by March 2021. Those 87 establishments accounted for around 1,040 jobs. However, it wasn’t all loss over the past year. The county saw the formation of 60 new establishments during the pandemic employing around 795 jobs. The net effect was a loss of 27 establishments and 245 jobs over the past year. To put it another way, business closures only accounted for roughly 14% of the accommodation and food service losses.
Where did the remaining 1,455 lost jobs come from? Those losses came from existing firms who cut their employment and by March 2021 continued to employ fewer workers than before the onset of the pandemic impacts. However, job losses by existing establishments weren’t universal as only about 40% of the accommodation and food services establishments reported lower employment in March compared with the pre-COVID peak. A higher share, roughly 50%, posted employment levels similar to the pre-COVID peak. Meanwhile, the remaining 10% of establishments actually posted notable employment gains over the past year.
The pandemic was not an equal opportunity offender, even for the hard hit accommodation and food services sector. A good example is limited-service restaurants where employment was on average much closer to the pre-COVID levels than for full-service restaurants. These limited-service restaurants had an easier time transitioning to takeout or delivery as many of them already provided these services.
Job losses being driven largely by contraction is encouraging. Had the bulk of job losses been concentrated in establishments that went out of business completely there would be more concern about a longer, more drawn out recovery. We saw that happen in the 2008 recession where the region lost a significant number of construction firms, making it difficult for the industry to recovery employment even after the demand for housing rebounded. Accommodation and food services businesses largely survived the pandemic recession, which will allow for a quicker recovery as it is easier to expand an existing operation than it is to wait for the creation of a new one.