Data from the BLS pertaining to March employment trends suggest that employment growth is becoming, on the margin, less of a tailwind for restaurant sales.
According to Christian Drake, Senior Analyst on the macro team at Hedgeye, today’s data “confirmed the sequential deceleration observed in both the ADP and NSA Jobless claims numbers earlier in the week. On balance, the labor market trends for March have followed the broader trends in the domestic macro data (ISM, PMI, Auto’s) where strong January and February numbers have been chased by been sequentially weaker March reports.”
For the restaurant industry, this sequential deceleration is a negative, on the margin. Casual dining same-restaurant sales have been decelerating and this is being confirmed by a deceleration in hiring in the industry.
Employment Growth by Age
Employment growth by age data implied a relative strength in QSR versus casual dining, on the back of positive growth in the employment of younger age cohorts, albeit sequentially slower versus January and February. The chart below illustrates continuing (slight) employment growth in the 20-24 and 25-34 YOA cohorts while employment growth in the 35-44 YOA and 45-54 YOA cohorts declined in March.
Restaurant Industry Employment
If we assume that hiring within the restaurant industry serves as a proxy for operator confidence, it seems that QSR operators have a much different outlook than casual dining operators.
The Leisure & Hospitality employment growth decelerated in March, suggesting that overall trends for the restaurant industry may be turning negative. The QSR industry is still hiring at a much faster rate than the full-service industry but February (the more narrow data is on a lag) was the first month since August 2012 that the spread between the respective employment growth rates declined month-over-month.