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November’s jobs report was strong as employers added 203,000 jobs during the month, well above the 180,000 that economists expected.  Following suit, the narrower data sets released were, across the board, bullish for the restaurant industry.  Employment growth across all cohorts improved on a sequential basis, suggesting that sales at QSR, fast casual and casual dining companies could pick up in the coming months.

Below, we discuss employment by age and restaurant industry employment.  These serve as proxies for demand and operator confidence, respectively, in our models.

Employment by Age (demand)

Employment growth by age skewed positively across the board in November as the 20-24 YOA cohort saw growth accelerate to +85 bps from +77 bps in October, the 25-34 YOA cohort saw growth accelerate to +140 bps from +78 bps in October, the 35-44 YOA cohort saw growth accelerate to +58 bps from -40 bps in October, the 45-54 YOA cohort saw growth slowing decelerate to -49 bps from -167 bps in October, and the 55-64 YOA cohort saw growth accelerate to +115 bps from +95 bps in October.

Employment by age is an important metric for the restaurant industry.  Given the discretionary nature of casual dining expenditure, and the highly competitive nature of the industry, we infer that sustained employment growth in core demographics is necessary for continued comp growth in the absence of new unit growth or income per capita growth.  The sequential deceleration in growth slowing in the 45-54 YOA cohort and the acceleration in the 55-64 YOA cohort reflect positively upon casual dining companies, indicating that we could begin to see demand pick up within the sector.

Within the QSR segment, we continue to find that the majority of management teams we track consistently highlight the importance of employment growth to the success of their business.  The sequential acceleration in the 20-24, 25-34, and 35-44 YOA cohorts, suggests that demand for quick-service and fast casual restaurants could also pick up.

EMPLOYMENT DATA: GOOD SIGN FOR RESTAURANTS - chart1

Restaurant Industry Employment (confidence)

The Leisure & Hospitality employment data, which leads the narrower food service by one month, suggests that employment growth in the food service industry decelerated sequentially in November.  That being said, the Leisure & Hospitality data registered a month-over-month increase of +17k (second chart below), a deceleration from October’s +49k month-over-month gain.

The more narrow restaurant-focused data sets are positive for their respective categories.  Both limited-service employment growth and full-service employment growth accelerated sequentially in October.

Sequential Moves

Leisure & Hospitality: Y/Y employment growth at +3.04% in November, down -3 bps versus October

Limited-Service: Y/Y employment growth at +4.47% in October, up +1 bps versus September

Full-Service: Y/Y employment growth at +2.68%, up +11 bps versus September

 

EMPLOYMENT DATA: GOOD SIGN FOR RESTAURANTS - chart2

 

EMPLOYMENT DATA: GOOD SIGN FOR RESTAURANTS - chart3

 

EMPLOYMENT DATA: GOOD SIGN FOR RESTAURANTS - Chart4

Howard Penney

Managing Director