EMPLOYMENT DATA: BEARISH FOR RESTAURANTS

January’s jobs report was disappointing as employers only managed to add 113,000 jobs in the month despite expectations of 185,000.  Following suit, the narrower data sets released were largely bearish for the restaurant industry.  Employment growth across the youngest two cohorts slowed on a sequential basis, suggesting that sales at QSR chains could remain light in the coming months.  Furthermore, employment growth in the Full-Service, Limited-Service, and Leisure & Hospitality categories continues to decelerate from its mid-2013 highs.

 

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 came in mixed in January as the 20-24 YOA cohort saw growth decelerate to +242 bps from +277 bps in December, the 25-34 YOA cohort saw growth decelerate to +19 bps from +149 bps in December, the 35-44 YOA cohort saw growth accelerate to +184 bps from +73 bps in December, the 45-54 YOA cohort saw growth slowing decelerate to -52 bps from -87 bps in December, and the 55-64 YOA cohort saw growth accelerate to +76 bps from +52 bps in December. 

 

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 improvement in the 35-44, 45-54, and 55-64 YOA cohorts is, on the margin, bullish for the casual dining industry.

 

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 – particularly growth in the younger cohorts.  The sequential deceleration in the 20-24 and 25-34 YOA cohorts suggests that demand for quick-service and fast casual restaurants could be waning. 

 

EMPLOYMENT DATA: BEARISH FOR RESTAURANTS - 1

 


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 -17 bps sequentially in January.  That being said, this category registered a month-over-month increase of +24K jobs (second chart below).  

 

The narrower restaurant-focused data sets are also bearish for the restaurant industry.  Both Full-Service and Limited-Service employment growth decelerated sequentially in December.  Growth across all three categories has been decelerating since mid-2013. 

 


Sequential Moves

 

Leisure & Hospitality: Y/Y employment growth at +3.09% in January, down -17 bps versus October

 

Full-Service: Y/Y employment growth at +3.17% in December, down -47 bps versus November 

 

Limited-Service: Y/Y employment growth at +4.05% in December, down -37 bps versus September

 

EMPLOYMENT DATA: BEARISH FOR RESTAURANTS - 2

EMPLOYMENT DATA: BEARISH FOR RESTAURANTS - 3

EMPLOYMENT DATA: BEARISH FOR RESTAURANTS - 4

 

 

Howard Penney

Managing Director

 

 


Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more