Labor Costs Rising as Businesses See Impact of Worker Shortage

Nonfarm worker productivity fell 7.5 percent during the first quarter of 2022, representing the largest decrease since 1947, according to new data from the Bureau of Labor Statistics.

Compared to the same quarter a year ago, labor productivity was down 0.6 percent as the 4.2 percent increase in output was outpaced by a 4.8 increase in hours worked. This marked the largest four-quarter decline since Q4 1993 when the measure also fell 0.6 percent, the BLS noted. At the same time, labor costs rose 11.6 percent for Q1 2022 – a 3.2 percent increase in hourly compensation and a 7.5 percent decrease in productivity. Further, unit labor costs rose 7.2 over the past four quarters, the largest jump since an 8.2 percent increase in Q3 1982.

The news comes as many sectors, including the restaurant industry, continue to be strained by a worker shortage. The National Restaurant Association’s 2022 State of the Restaurant Industry Report found that roughly half of operators in the full service, quick service and fast-casual segments expected recruiting and retaining employees to be their top challenge in 2022. As a result, 75 percent of operators said they planned to devote more resources to recruiting and retaining employees in 2022.

Many major operators are also looking for solutions that will enable them to function with fewer staff members. Starbucks Interim CEO Howard Schultz, for example, last week announced $1 billion in funding during fiscal year 2022 for investments such as equipment and technology upgrades to help stores meet customer demand.

Staffing is expected to remain a major issue for the foreseeable future. In addition to the worker productivity report, the BLS also published updated data that showed there were 11.5 million job openings at the end of March – a new record for the 22-year-old data set.