Business is booming.

Restaurant, Hotel Workers Are Only Winners in Inflation-Vs-Wages War

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  • Leisure and hospitality workers are the only sector to have wages outpace inflation in the past year.
  • The sector’s real wages are up 0.2% since July 2021, according to government data.
  • All other sectors have seen surging inflation crush workers’ buying power.

Inflation is finally slowing down, but most Americans are still struggling to keep up.

Hotel and restaurant workers, however, are doing just fine.

Inflation data published Wednesday morning revealed clear signs that the year-long price surge is reversing course. Year-over-year inflation slowed to an 8.5% pace in July, the Bureau of Labor Statistics said, down from the 9.1% rate in June. The Consumer Price Index held flat through July alone, also slowing from the prior month’s pace.

Across every measure, CPI inflation came in below economists’ forecasts. Yet workers aren’t likely to feel much relief.

That’s because, for the vast majority of working Americans, raises haven’t come close to keeping up with inflation. Average hourly earnings adjusted for inflation plunged through much of the pandemic, first dragged lower by the pandemic recession and then weakened by surging inflation. On average, workers have less buying power today than they had at the start of the pandemic.

The headline wage metric only tells part of the story. Pay in some sectors has dramatically fallen behind inflation, leaving workers ill-equipped to shoulder this year’s price surge.

Workers in the “other services” sector, which includes machinery repair, religious activities, dry cleaning and laundry, and more, are the furthest behind in the inflation race. Real wages in the sector are down 4.9% year-over-year, according to government data.

Wholesale trade workers follow close behind, with their real pay dropping 4.4% in the year through July. Mining and logging workers’ inflation-adjusted wages are down the same amount. Manufacturing employees fared only slightly better, with real pay down 4.2% over the period.

Only leisure and hospitality workers have seen their buying power improve throughout the past year. Employees in the sector have seen their inflation-adjusted wages climb 0.2% since July 2021. That 12-month period encompasses the initial spread of the Delta variant, subsequent economic restrictions, the Omicron variant’s rapid spread, and the start of this year’s summer travel season.

Businesses in the sector including restaurants, bars, and hotels rushed to rehire throughout 2021 as vaccine rollouts revived in-person spending. As the US adapted to a new pandemic-era economy, leisure and hospitality firms paid up to ensure they were fully staffed and ready to meet Americans’ massive demand.

That hiring spree is ongoing; leisure and hospitality businesses added 96,000 payrolls in July, more than any other sector. They also boasted nearly 1.5 million job openings at the end of June.

For the rest of the labor market, there’s still hope that wages can catch up to inflation. Gas prices continued to fall through the first week of August, signaling headline inflation could fall again when the next CPI report is published in September. The prices of various commodities have also softened in recent weeks, as has buying activity in the housing market. The economy that was once rife with demand and lacking supply is starting to balance out.

Wage growth before inflation, meanwhile, is going strong. Average hourly earnings gained by $0.15, or 0.5%, in July, surpassing the estimate for a 0.3% increase and accelerating from the prior month’s 0.4% uptick. Job openings data for June also showed labor demand still dramatically outpacing supply, suggesting businesses will have to keep lifting wages at a faster-than-usual pace in order to hire and retain workers.

The labor market has a long way to go if it’s to catch up with the fastest inflation in four decades. Early signs hint the race isn’t over just yet.

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