Today’s employment data were positive for the restaurant industry.
With the exception of the 55-64 YOA cohort, which is seeing healthy employment growth despite the sequential deceleration in trends, all age cohorts we monitor saw a sequential improvement in employment trends. The chart below illustrates the national employment trends by age. For QSR, in particular, the pickup in the numbers from the summer through the fall has been encouraging for sales trends in the fourth quarter. Food and beverage spending trends, relative to overall PCE, have been strong throughout this housing downturn as spending on housing-related sectors has lagged. We anticipate that any continuation of employment growth will be beneficial for the restaurant industry going forward.
The restaurant industry is still hiring. Despite the upward trend having stalled over the last few months, the data indicates that – at least through October – restaurant operators have been hiring more versus a year ago and that is a positive sign. We were concerned about the downtick in Full Service employment growth in September, thinking that the trend could have been rolling over, but October’s growth in full service employment was sequentially higher than the month prior. In the event of a serious downturn or recession taking place we would be more positive on QSR names than Casual Dining.
At this juncture, we like YUM, MCD and EAT on the long side. DNKN and BWLD remain our top two picks on the short side.
Howard Penney
Managing Director
Rory Green
Analyst
