QSR INDUSTRY – TEEN UNEMPLOYMENT

The current outlook on summer job opportunities for teenagers does not bode well for QSR demand.

The 16-19 year old age group is an extremely important demographic for QSR operators and the increasing rate of unemployment among this age group since 2Q08 has taken its toll on QSR demand.  Restaurant management teams across the industry have cited higher unemployment as the primary cause of weaker demand, but QSR operators have been more vocal about how the even higher rate of unemployment among its younger, core users has hurt trends. 

Specifically, JACK management stated on its fiscal 4Q09 (period ending September 27, 2009) earnings call, “In addition, unemployment rates for our core customer demographic which skews towards young males and Hispanics are substantially higher than the overall rates.  According to the Department of Labor, on a seasonally adjusted basis, 16 to 24 year olds had a very rough summer in 2009, with fewer than 50% working.”   Judging by the significant year-over-year decrease in the number of jobs added for 16-19 year olds in May 2010, as reported by the Bureau of Labor Statistics, this summer could prove even more difficult. 

In May, employment among 16 to 19 year olds grew by only 6,000 sequentially from April relative to the 110,000 increase in May 2009 and the 116,000 increase in May 2008.  As the chart below shows, the magnitude of jobs added typically increases in June and July from May levels so it will be important to watch how the rest of the summer plays out to get a better read on the current teen employment picture, but May points to a rough start and could put increased pressure on 2Q and 3Q QSR sales trends.

QSR INDUSTRY – TEEN UNEMPLOYMENT - 16.19 summer employment growth

 

QSR INDUSTRY – TEEN UNEMPLOYMENT - 16.19 may employment growth

 

QSR INDUSTRY – TEEN UNEMPLOYMENT - 16.19 unemployment rate

 

Howard Penney

Managing Director