Slow restaurant hiring dampens Iowa’s economy in March

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Iowa’s economic recovery lost momentum in March, shedding jobs for the first time in five months.

Nonfarm payrolls in the state fell by about 1,500 from February to March, according to survey data released Friday by the U.S. Bureau of Labor Statistics. Job losses in the accommodation and food service sector have particularly weighed on the economy.

Despite the slight drop in the number of workers with jobs, a separate federal survey showed that Iowa’s unemployment rate had actually improved, from 3.5% in February to 3.3% in March.

Iowa’s rate is the 20th lowest in the nation. The state rate stood at 2.6% two years ago, before the COVID-19 pandemic led to mass business closures.

Iowa’s pace of recovery continues to lag that of the nation as a whole. Over the past year, the United States has created jobs more than twice as fast as Iowa.

Despite the slow growth, Iowa Workforce Development Director Beth Townsend said in a statement that the latest jobs report showed positive signs. The number of unemployed has continued to fall and the number of people in the labor market—those who have a job or are looking for a job—has increased.

“We’re starting to see real progress,” Townsend said.

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Parts of Iowa performed well last month. Retailers added about 900 workers, according to the BLS. And wholesale businesses, such as companies that sell raw materials, added about 700 workers.

But other industries have suffered. The number of Iowans employed in health care and social assistance fell by about 800, as did those in the arts, entertainment and recreation sector.

Restaurants, however, suffered the most. The number of workers in the accommodation and food services sector fell by 2,000 from February to March, according to the BLS. Although still below their pre-pandemic level, companies in the sector had been steadily adding jobs for six months, starting in August.

Iowa Restaurant Association President Jessica Dunker said business owners in the state continue to struggle to find workers. The economy appears to have changed as a result of the pandemic, she said.

A surge in online sales – linked to the opening of four Amazon.com warehouses in the metro – has created new delivery and sorting jobs. And, Dunker said, the restaurants are no longer attracting the state’s oldest and youngest workers.

“They just go to other industries,” she said. “(Restaurants are) so easy to choose.”

She said workers often used to take service jobs when they reached their upper 50s and early 60s, using tips to make ends meet after retirement. But she said those workers did not return.

On the younger side, other desperate companies are ready to hire teenagers, a group who turned to restaurants for their first job, she said. Dunker’s own teenage sons took jobs as a certified nursing assistant and child care worker.

At the Little Brother restaurant in Windsor Heights, owner Joe Tripp said he cooked from 6 a.m. to 9 p.m. every day for months.

A seasoned restaurateur who also owns the upscale Ingersoll Avenue Harbinger establishment, Tripp said he hadn’t cooked in years. He prided himself on keeping a full and consistent staff.

“But there weren’t the bodies to fill the positions,” he said.

Chef and restaurant owner Joe Tripp prepares food during a lunch rush at Little Brother in Windsor Heights on Saturday January 22.

After opening the restaurant last summer, he said he couldn’t muster the number of employees he needed.

Tripp said he provides some of the best perks in the business. The company covers 100% of health insurance costs for Harbinger employees who stay at least three years. He’s paid for his house manager’s vacation in Japan in 2020, and he’s taking Harbinger’s kitchen crew to Vietnam.

Despite this good reputation, he said, applications are coming in slowly. He added enough employees to reduce his own hours in the kitchen. But he would like to hire three more cooks, two more waiters and a bartender.

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At Lola’s Fine Kitchen in Ankeny, owner Heather Elliott closed the business on a few Mondays and Wednesdays last month. Without enough workers, she worked from 8 a.m. to 7 p.m. six days a week for two straight months, she said.

Her husband, a recruiter for an insurance company, worked at the cash desk during his lunch breaks. Her 12-year-old son worked at the registry during his spring break.

Finally, Elliott said she needed to reduce the number of days. Some of her employees needed time off and she couldn’t fill the gaps.

Lola's Fine Kitchen Wednesday October 31, 2018.

“Some people have to go home and see their families,” she said. “They have to have days off. They have events. Their life doesn’t revolve around that particular place.”

She said the restaurant rebounded this month. She now guarantees employees earn at least $15 an hour, regardless of tips, a move she says has helped attract new workers.

“It really gives them something to motivate them to like it,” she said, “to enjoy what they’re doing and wanting to take the hours off and wanting to be here.”

How does Iowa’s economic recovery compare to the rest of the country?

Since May 2020, when companies started hiring again, Iowa has recovered 85% of the jobs lost during the initial shock of the pandemic.

While the state’s recovery has been faster than it was during the Great Recession that began in 2007, Iowa still lags behind the rest of the country. Overall, the United States recovered 93% of lost jobs.

Iowa’s problem isn’t that companies here employ a lot of workers in slow-growth jobs, said Peter Orazem, an economist at Iowa State University. Instead, some sectors in Iowa are simply creating jobs at a slower rate than their counterparts in other parts of the country.

In Iowa, the professional, scientific and technical services sector has cut about 500 jobs since the start of the pandemic. This sector, which includes everything from lawyers to accountants and engineers, added 607,000 jobs nationwide during the same period.

The news sector, which includes broadcasters and publishers, has cut about 1,200 jobs in Iowa since February 2020. Nationally, the sector has added about 26,000 workers.

Iowa’s transportation sector, meanwhile, has been stronger than many industries in the state, adding 2,600 employees since the pandemic began. However, across the United States, the sector is adding jobs more than twice as fast as in Iowa, with transportation payrolls rising by 608,000.

Orazem said he’s particularly troubled by a decline in the size of Iowa’s workforce — workers who are either employed or looking for work.

From 2019 to 2021, the labor force participation rate for Iowans aged 45 to 54 rose from 92% to 84%. Nationally, the rate for this age group has remained stable at around 81%.

Orazem said the drop is troubling and it’s hard to understand what happened. It’s not an age group that would typically need child care, he said, because most of their children would be in high school.

At the same time, most people between the ages of 45 and 54 are not retiring early because of the pandemic, he said.

“To be honest, I don’t know what people between 45 and 54 do,” Orazem said. “Those are the highest earning years in someone’s life.”

Which Iowa businesses still haven’t recovered from the pandemic?

The health services sector continues to be the biggest drag on Iowa’s economy, with about 10,900 fewer employees than in February 2020.

Other sectors still in difficulty: accommodation and catering; manufacturing of durable goods; local government; and arts, entertainment and recreation.

On the other hand, retail businesses have added 4,900 workers since the start of the pandemic. Other job-creating sectors: manufacturing of non-durable goods, transportation and business management.

Tyler Jett covers jobs and the economy for the Des Moines Register. Join it at tjett@registermedia.com, 515-284-8215, or on Twitter at @LetsJett.

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