One thing stands between the US labor market and a full recovery from the pandemic

Back in August 2022, the number of people employed in the US officially overtook pre-pandemic highs reached in February 2020.

But the headline recovery in the labor market papered over weakness that remained in the industries hardest hit by the pandemic. Namely, restaurants and hotels.

The September jobs report showed employment in the accommodations industry — which covers hotels — remains the last major holdout in restoring the labor market to its pre-pandemic status.

In September, employment in the food services and drinking places industry rose by 61,000, returning this industry to its February 2020 level. As of September, 12,368,400 people worked in this industry; in February 2020, 12,338,900 people were employed in this line of work.

Accommodations employment, in contrast, stood 10.3% below levels that prevailed just before the pandemic. Last month, the industry added 16,000 workers, bringing the employment total for this industry to 1,895,500; in February 2020, there were 2,054,500 people employed in this industry.

And this weakness in accommodations employment accounts for more than all of the gap in leisure and hospitality, the only major industry tracked by the BLS that has not recovered its pandemic-induced losses.

As of September, leisure and hospitality employment was just 184,000 jobs short of February 2020 levels. Accommodation and food services — a sub-industry within leisure and hospitality — employment was 187,500 jobs shy of these levels. And as we saw above, that gap is solely attributable to the shortfall in accommodations.

Overall, the US labor market added 336,000 new jobs in September, nearly double the 170,000 that were forecast by Wall Street. This report served as the latest sign the economy remains more resilient than expected by many economists.

"The labor market remains robust," wrote Bank of America economist Stephen Juneau in a client note on Friday.

Juneau also noted that hiring in "high-touch services sectors [like] education and health, leisure and hospitality, and other services" accounts for 55% of the job gains we've seen this year. "In short, the sectors that lagged behind the broader labor market recovery continue to hire at a rapid clip."

And that we're slicing the industry data on employment this finely to find the remaining cracks in the labor market speaks to the strength of this recovery and the encouraging dearth of residual damage lingering from the pandemic.

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