The restaurant labor market is cooling, statistics show.

To understand why, one has to look at the state of the sector in early 2020. That spring,  pandemic-induced mass layoffs and unemployment insurance programs implemented to forestall a catastrophic loss of income made workers more likely to look for new jobs. 

When hiring picked up later that year, low-wage workers — like those in restaurants and hotels — had more bargaining power at the individual level, said Elise Gould, a senior economist at the Economic Policy Institute. As a result, wages began to grow. 

“Low-wage growth between 2019 and 2022 [was] much faster than any other business cycle that we've had in the U.S.,” Gould said. 

As employer competition for workers heated up, prospective employees were able to exercise greater discretion in taking jobs, Gould said, further increasing wage growth.

Ara Kharazian, a research and data lead for Square, said wage growth across geographical regions mean most restaurant workers now earn at least a couple dollars more than minimum wage.

“Even the 10th percentile of workers are making several dollars above the minimum wage,” Kharazian said.

In foodservice and hospitality, wage growth outpaced inflation in 2021 and 2022, a stark contrast to most industries, which saw wages lag behind increases in the consumer price index. 

But in recent months, that wage growth has started to moderate.

“Nominal wage growth has been decelerating,” Gould told Restaurant Dive in an interview for the six-month update to this article. 

Data collected from 200,000 retail and restaurant workers by Square supports this moderation, with year-over-year wage growth for restaurant workers lower than at any time since March 2020. 

This trend may be due to a gradual loosening of the labor market, meaning the number of job openings and job seekers is converging as employment nears pre-COVID-19 levels. According to one working paper from the National Bureau of Economic Research, high turnover, low unemployment and a high number of job openings per applicant in low-wage sectors was significant enough to measurably decrease worker pay inequality through wage growth.

Kharazian said that the loosening of the labor market primarily means a return to pre-pandemic norms. 

“What's already normal for a restaurant industry is also a pretty dynamic and hot labor market,” Kharazian said. “Because there's so much turnover and retention is such a top-of-mind issue for businesses.”

Restaurant Dive has traced these labor trends in six graphs below, based on Bureau of Labor Statistics data. This data shows that sectoral employment has reached pre-pandemic levels and unemployment in the sector is steady year over year, while hires, quits and total separations have fallen or remained steady since early 2023. 

Taken together, this data shows a clear, if small, loosening of the national restaurant labor market, indicating that workers are losing some power to demand high wages and exercise discretion in job choices.

These graphs will be updated monthly, and we will refresh our analysis to reflect changes in major labor market trends.

Unemployment in accommodation and food services peaked at about 35.4% in April 2020. It has since fallen steadily, hovering between 5% and 6% for most of 2022 and 2023. Sectoral unemployment has fluctuated since December 2023, when it hit 4.7%, before jumping to 5.8% in January, falling again to 4.9% in February and reaching 5.5% in March.

The hours worked by restaurant workers haven’t changed much outside of the early months of the pandemic, between March and May 2020. But average weekly hours through most of 2023, and early 2024, trailed 2022 levels, which could indicate reduced market power for workers and a greater reliance on part-time workers by employers.

Average wages for production and nonsupervisory restaurant workers jumped from $13.36 in April 2020 to $18.36 in February 2024. But that increase in nominal wages obscures the impact of inflation on wages: Extending the timeframe back to 2018, which gives two control years, shows that wages have increased only modestly, from $12.78 in January 2018 to $14.66 in 2024.

Gould noted that the increase from January 2023 to early 2024 was significant. Nominal wages grew about 6% while inflation-adjusted wages, using Restaurant Dive’s benchmark, grew a modest but noticeable 2.2%. But that growth, Gould said, has not changed the fundamental dynamics of the-low wage labor market.

“Low wage workers still have a really hard time making ends meet. It’s not like we've negated the fact that many workers just really suffer from very low wages,” Gould said.

The number of restaurant workers stabilized around 12.2 million in Q2 2023, ending a run of dramatic growth that began in December 2020. Employment reached pre-pandemic levels in September 2023, with 12.3 million workers in the sector, and has grown slowly since. This fact, combined with the steady unemployment rate, could indicate the sector is nearing full employment.

Shown here both in absolute numbers and in percentages of the restaurant workforce, key indicators of labor turnover, quits and total separations have fallen since early 2023, with occasional fluctuations. Job openings have outpaced hiring every months save one in the last year.

Such a slowing of turnover is a sign that conditions in the restaurant labor market are shifting back in the favor of employers, but the rebound in job openings and quits in recent months show that retention and labor turnover remain an endemic issue in the industry. 

“One key way to raise your wages [has been] to leave your current job,” Gould said. “Now, since that trend has slowed down, you no longer have that sort of primary way to get wage increases by leaving your job and taking another one. I’m not surprised that we’re seeing that slow down as well.”