Question

In April, employment in leisure and hospitality plummeted by 7.7 million, or 47 percent. Almost three-quarters of the decrease occurred in food services and drinking places (-5.5 million). Employment also fell in the arts, entertainment, and recreation industry (-1.3 million) and in the accommodation industry (-839,000). [Employment Situation, Bureau of Labor Statistics]

Draw a demand and supply diagram for the leisure and hospitality that illustrates the above information. Explain your diagram and any changes you draw.

Answer 1

As per the given information, in April, employment in leisure and hospitality plummeted by 7.7 million, or 47 percent.

This implies that Demand for labor has fallen by the above mentioned number. This demand comes from employers, who have been suffering the impact of the economic downturn. Thus, they no longer need workers.

The supply of workers doesn't change. However, the entire industry loses a lot of jobs.

The following diagram depicts a demand and supply diagram for the leisure and hospitality industry:

Due to the economic downturn, firms in the leisure and hospitality industry are not getting enough customers.

Many firms have been forced to shut down. Therefore, they no longer require as many workers as earlier.

Demand for workers has fallen drastically. This has caused the wage rate to fall. Further, this has destroyed millions of jobs.

Now, these jobs may or may not be created again when the economy revives. However as of now, many of those workers are no longer required by the industry.