Why the leisure and hospitality sector is booming

Hint: It's not because the economy is on fire

Restaurants are hiring more people for part-time work.
(Image credit: Thinkstock)

This year, the leisure and hospitality industry has been adding the lion's share of new jobs to the U.S. economy.

Since April, hotels, restaurants, bars, and other leisure businesses have created an average of 50,000 jobs a month, double the rate from 2012, and more than any other industry. In June, 75,000 of the 195,000 new jobs created in the entire economy were cooks, waiters, bartenders, etc.

Traditionally, a booming leisure industry points to a healthy economy: When people have more money to spend and confidence in their jobs, they treat themselves to more food, drinks, and vacations. But that's probably not what's happening here. The Wall Street Journal says many of the new jobs are part-time, which could be a direct reaction to ObamaCare.

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The Affordable Care Act requires employers with 50 or more full-time workers to provide affordable insurance to employees working 30-plus hours a week. If employers don't pay for insurance, they will pay a fine instead.

Anticipating the pinch, some businesses are shaking up their staffs — cutting back on full-time workers, and adding part-time workers.

That's partly why the Obama administration recently delayed implementation of the provision to 2015, from 2014.

The data indicates that the entire job market — not just leisure and hospitality — is shifting toward part-time employment: Of the 753,000 jobs created since the beginning of the year, 589,000 were part-time, says the Department of Labor. "For the entire U.S. workforce, employers have added far more part-time employees in 2013 — averaging 93,000 a month, seasonally adjusted — than full-time workers, which have averaged 22,000. Last year the reverse was true, with employers adding 31,000 part-time workers monthly, compared with 171,000 full-time ones," said the Journal.

And even though 195,000 new jobs were added in June, the U6 — a broader measure of unemployment that includes people with part-time jobs looking for full-time work, and those who have abandoned their job search — actually rose to 14.3 percent, from 13.8 percent.

So why is leisure and hospitality adding more jobs than other industries? One reason may be that a high turnover rate lets employers replace full-time jobs with part-time jobs more quickly. Other factors: Restaurant chains are adding new locations, and as growth in other industries lags, jobless Americans are more likely to take restaurant jobs that used to be filled by undocumented workers, and thus weren't reported.

However, part-time workers also stand to benefit under the Affordable Care Act. In a recent column, the New York Times's Casey B. Mulligan wrote:

The part-time employee has to pay for his own health insurance, but the new law limits his premiums to $2,149 (the new law pays the other $12,658 from the United States Treasury) and limits his out-of-pocket health costs to $2,193 (the new law pays the other $2,907; by design the new law increases deductibles and co-payments but uses subsidies to offset those increases for low- and middle-income families)...

By taking a part-time position, the employee can have comprehensive health insurance coverage and make almost the same money as he would in a full-time position. Thus the two traditional deterrents to part-time employment are disappearing. [The New York Times]

But that could put a greater strain on the nation's safety net. "Shifts from full-time to part-time work will be remarkably more attractive for employers and employees than they used to be," Mulligan wrote, "and taxpayers will be picking up the tab."

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Carmel Lobello is the business editor at TheWeek.com. Previously, she was an editor at DeathandTaxesMag.com.