Arkansas’ frontline leisure and hospitality face new realities with ongoing worker shortage

June 14-20, 2021

By Wesley Brown

Although employers are excited about the economy reopening and getting back to work after Gov. Asa Hutchinson ended the state’s public health emergency on May 30, many are still having difficulty finding workers to fill key jobs and adapting to the new, non-virtual workplace.

In Arkansas’ most recent job report, Hutchinson and state workforce officials still acknowledged that employment levels have almost fully recovered from a year ago when shelter-in-place orders nearly shut down the economy and caused the state’s jobless rate to balloon to a yearly high of 1%.

Through April, state labor force data produced by the U.S. Department of Labor’s Bureau of Labor Statistics (BLS) and released monthly by Arkansas Division of Workforce Services show Arkansas’ seasonally unemployment rate remained stable at 4.4%. Between March and April, Arkansas’ civilian labor force increased 1,984, a result of 2,779 more employed and 795 fewer unemployed Arkansans.

“Compared to April 2020 when COVID-related job losses peaked, the number of unemployed in Arkansas has declined 77,978. Employment is up 68,488 and the unemployment rate is down significantly from the peak of 10% last April,” said Susan Price, program operations manager for DWS labor statistics group.

By comparison, the U.S. jobless rate through April rose one-tenth of a percentage point to 6.1%. More recently, the May job data released on June 4 showed that the U.S. job market continues to improve as the national unemployment rate declined by an additional 0.3 percentage point to 5.8% in May. That jobless rate decline also included news that an additional 559,000 new jobs were added to the U.S. economy in May, which boosted sentiments on Wall Street.

In the highly watched National Employment Report produced by ADP and Moody Analytics each month, estimated private sector employment jumped by 978,000 jobs from April to May. ADP’s monthly report is derived from ADP’s actual payroll data that measures the change in BLS data for total nonfarm private employment on a seasonally adjusted basis.

“Private payrolls showed a marked improvement from recent months and the strongest gain since the early days of the recovery,” said Nela Richardson, chief economist at ADP. “While goods producers grew at a steady pace, it is service providers that accounted for the lion’s share of the gains, far outpacing the monthly average in the last six months. Companies of all sizes experienced an uptick in job growth, reflecting the improving nature of the pandemic and economy.”

Hutchinson’s post-pandemic plan

Heading into the pandemic in February 2020, Arkansas’ jobless rate at 3.5% was just one-tenth of a percentage point higher than the state’s all-time low touched in the summer of 2019. Following the strong April job data report, Hutchinson expressed confidence that Arkansas’ job market is showing marked improvements in key business sectors that were devastated by the pandemic, including the Natural’s state’s tourism, healthcare and hospitality industries.

“Our stable unemployment rate assures me that we are steadily moving in the right direction after more than a year of COVID-19,” said Hutchinson. “Before the pandemic, our economy was strong. We’ve encountered many challenges over the past 15 months, but we have persevered and fought our way back from the 10% rate a year ago.

“The highlight of the report is that more Arkansans are finding jobs and returning to the workforce. I am particularly pleased with the employment gains in the hospitality industry, and I am hopeful the next month will show even more Arkansans returning to work,” Hutchinson continued. “The fight is not over, but as we continue to do everything within our power to overcome COVID-19, our perseverance is producing signs of great progress in our economy but more importantly, in a return to our daily life.”

The governor’s upbeat assessment of the state’s job market comes nearly a month after he announced that Arkansas planned to opt out of the federal supplemental unemployment assistance that offers state jobseekers an extra $300 per week during the COVID-19 pandemic.

Under the American Rescue Plan Act signed into law by President Joe Biden on March 11, unemployment benefits were extended until September 6 with a weekly supplemental payout of $300 on top of the regular $400 benefit. The first $10,200 of unemployment benefits will be tax-free for people with incomes less than $150,000.

However, Hutchinson in May directed the DWS to end Arkansas’s participation in the federal program after June 26. Alabama, Arizona, Idaho, Iowa, Mississippi, Missouri, Montana and South Carolina are the other U.S. states to opt out of the federal unemployment assistance initiative to date.

“The programs were implemented to assist the unemployed during the pandemic when businesses were laying off employees and jobs were scarce,” said Hutchinson. “As we emerge from COVID-19, retail and service companies, restaurants, and industry are attempting to return to pre-pandemic unemployment levels, but employees are as scarce today as jobs were a year ago. The $300 federal supplement helped thousands of Arkansans make it through this tough time, so it served a good purpose. Now we need Arkansans back on the job so that we can get our economy back to full speed.”

Following Hutchinson’s decision to refuse the federal supplement compensation that could provide Arkansas workers over two additional months of assistance on top of 16 weeks of normal unemployment, he received strong support from the state chapter of the National Federal of Independent Business (NFIB).

In April, NFIB’s monthly Small Business Optimism Index rose 2.4 points in March to 98.2. March’s reading is the first return to the average historical reading since last November. The NFIB Uncertainty Index increased six points to 81, which was primarily driven by owners being more uncertain about whether it is a good time to expand their business and make capital expenditures in the coming months. 

“Main Street is doing better as state and local restrictions are eased, but finding qualified labor is a critical issue for small businesses nationwide,” said NFIB Chief Economist Bill Dunkelberg. “Small business owners are competing with the pandemic and increased unemployment benefits that are keeping some workers out of the labor force. However, owners remain determined to hire workers and grow their business.”

“Our Arkansas members say they’re hiring, but it’s hard for them to find candidates with the right skills and experience,” added NFIB State Director Sylvester Smith.

However, John Bivens, economist and director of economic research for the progressive Economic Policy Institute, said the debate on the slow hiring in some frontline industries should center around wage growth, not a labor shortage.

“When economists or other analysts express concerns about labor shortages, they generally mean a shortfall of potential employees that forces employers to gouge deeper into their profit margins to raise wages to attract workers,” said the Washington, D.C.-based economist. “At some point this gouging will become unsustainable and so hiring will lag.”

Arkansas leisure and hospitality sectors reopen, face new challenges

One of Arkansas’ key industries impacted by the pandemic-induced labor shortage is the state’s hospitality and tourism industry, which lost over 35,000 jobs in April 2020 after Hutchinson issued stay-at-home and social distancing orders more than a year ago. According to the latest DWS report, the state’s tourism and hospital sector added 3,800 new jobs between March and April. That nonfarm job sector now has a total of 111,110 employees, up from only 76,400 a year ago.

Montine McNulty, executive of Arkansas Hospitality Association, said while restaurants and lodging establishments across the state are seen a pickup in business following the end of Hutchinson’s public emergency declaration, employers are still struggling to get back to full

“Everyone is experiencing employee shortages,” said McNulty, whose organization is also the umbrella clearinghouse for the Arkansas Lodging Association, the Arkansas Restaurant Association and the Arkansas Travel Council. “What I am hearing is that they are not available, they can’t find help and it’s affecting the restaurants, the hotels, special events, or any type of hospitality business.”

Noting the worker shortage and lack of hiring in the local food and restaurant sector, McNulty has also implementing a guidance from the National Restaurant Association (NRA) and American Hotel and Lodging Association to help restaurants restart with recommendations for food safety, cleaning and sanitizing, employee health monitoring, and social distancing.

“We communicate with them on a daily basis and act as their boots on the ground in Arkansas, so to speak,” said McNulty, who has led ATA since 1996.

The trade association executive also said that ATA worked closely with the Arkansas district office of the U.S. Small Business Administration as the Paycheck Protection Program and the Biden Administration’s $28.6 billion Restaurant Revitalization Fund sunsetted on May 30. The SBA’s centerpiece PPP fund handed out more than $850 billion in forgivable loans to more than 8.5 million small businesses under the former President Donald Trump’s CARES Act and President Joe Biden’s rescue plan, both costing taxpayers $2.2 trillion.

The Restaurant Revitalization Fund was established by the Biden administration with an initial $5 billion set-aside established by Congress for applicants with gross receipts not more than $500,000. To further ensure an equitable distribution of funds, the SBA created two additional funding allocations to ensure the smallest of the small restaurants and other eating establishments had equal access as large food eateries and restaurants.

In the first two weeks of the RRF launch in mid-April, the SBA said it received 12,898 applications from businesses with not more than $50,000 in pre-pandemic revenue requesting $290 million in funds. There were 73,671 applications from businesses with not more than $500,000 in annual pre-pandemic revenue requesting $6.1 billion in funds, while 34,010 submissions came from larger businesses with $500,000 - $1,500,000 requesting $8.4 billion in PPP funds.

After the RRF program shut down on May 24, SBA officials said it had received more than 303,000 applications representing over $69 billion in requested funds, and nearly 38,000 applicants have been approved for more than $6 billion. Of the overall submitted applications, 57% came from women, veterans, and socially and economically disadvantaged business owners.

McNulty said ATA began work with the SBA to help local restaurants with the application process for the RRF fund before it was launched on April 17. She said the financial need for Arkansas restaurants and food establishments was overwhelming, causing the number of applications to quickly outstrip available funding.

“There has been twice the number of applications that can be funded. So, the money has run out, and the ones that did not quickly get their applications in – unfortunately, it is too late and many of those that are applied are too late,” McNulty explained.

Concerning the worker shortage, McNulty said the state’s leisure and hospitality sector is one of opportunity and growth. She said pay in the industry, a frequent industry criticism, has continued to increase and better working hours are now the norm.

“We have flexible hours, we have weekend work, evening work, lunchtime work, and the pay has gone up,” she said. “We have so many entrepreneurs in this industry, and it is a great place to get a job, move up and own your own business and do well.”

McNulty also said the assumption among consumers is that business is back to normal. However, she said the pandemic has brought in sweeping changes that have significantly altered traditional restaurant operations, which is driving up costs as some businesses struggle to recover and adapt. Those changes include the higher use of technology, menu variations, improved customer safety, new restaurant cleaning rules, social distancing, and the introduction of third-party delivery services DoorDash, Postmates, Uber East and Grub Hub.

“The fact is that the business model is not back for the hospitality industry, and it is not back for restaurants, hotels and tourism. It is going to take a while for that business model (because) there are a lot of changes being made and they’ve really affected us,” she said. “Food costs are up, labor costs are up, and everything is not OK – everything has changed.”   

PHOTO CAPTIONS: 

1. and 2.  Reopening Arkansas: Worker shortage imperils post-pandemic job market rebound Local restauranteurs, hotel operators, and tourist-focus businesses go into summer vacation season with high hopes but new challenges.

3.  (Photo provided by Division of Arkansas Tourism)

4. After Gov. Asa Hutchinson ended Arkansas' COVID-19 public emergency on May 30, more Central Arkansas restaurants and retailers are reopening and offering curbside pickup and delivery services.