Employment data released this morning by the Bureau of Labor Statistics are a near-term positive for the restaurant industry, particularly Quick Service, as employment trends in Leisure & Hospitality held up in July.
Employment by Age
Employment growth among the 20-24 YOA cohort, which has been highlighted by several QSR management teams as an important source of demand, accelerated to 3.7% year-over-year in July from 3.4% in June. The 45-64 YOA and 55-64 YOA cohorts saw sequential decelerations in their respective employment growth rates. These demographics are important for casual dining and we will continue to monitor employment growth for these age groups as it has been a significant tailwind for casual dining over the last year. Our cautious stance on casual dining sales trends, initiated in April, has been largely correct but the stocks traded with more resilience than we anticipated (led by Brinker). We continue to like Brinker over the long-term tail as it takes share from the competition but macro concerns give us pause over the near term trade duration.
The Leisure & Hospitality employment data, which leads the narrower food service data by one month, suggests that employment growth in the food service industry may stabilize in July. On a sequential basis, the Leisure & Hospitality employment data registered a month-over-month gain of 27k (second chart below). This is positive news for the restaurant industry, at least over the near-term. Employment growth within the limited service industry saw a sequential acceleration in June while full service employment growth decelerated from May to June.
- Leisure & Hospitality: Employment growth at +2.16% in July, up 7 bps versus June
- Limited Service: Employment growth at 3.5% in June, up 42 bps versus May
- Full Service: Employment growth at 2.6% in June, down 12 bps versus May