This Week In Foodservice: Top Line Job Growth Looks Good but There's More to the Story

Job growth is critical for the foodservice industry to continue to grow. So the fact that the Bureau of Labor Statistics' November jobs report showed a decline in unemployment is a good thing, right? Not when it means there are fewer people in the workforce. So foodservice will continue to ride the wave of emotion that accompanies the foggy labor outlook.

The Bureau of Labor Statistics' November jobs report found unemployment declining to 7.7 percent from 7.9 percent in October. Some people will probably read the headline and feel pretty good. Unfortunately, the Bureau stated that drop was due almost entirely to fewer people in the labor force. In other words, there were more discouraged workers who had given up looking for jobs and are no longer counted as unemployed.

The number of new jobs created last month exceeded forecast with the private sector hiring 147,000 more people. The net gain was 146,000 because of 1,000 fewer government jobs.

The Bureau said that Hurricane Sandy did not seem to have any significant impact on the November stats, a statement that caused at least a few raised eyebrows. There will be a better view when the state and regional numbers come out.

First time jobless claims fell by 25,000 to 370,000 for the week ending November 30. The less volatile 4-week average reached 405,000.

Some labor experts did not find the numbers terribly encouraging. There are 8.2 million people classified as underemployed, meaning they work part time but want to work full time. There are 4.8 million long-term unemployed people and some economists speculate that a lot of them will never find a full-time job again or at least any job comparable to the one they lost. This is particularly true of people in their mid-50s or older.

It's a complex problem, as numerous writers point out. Thousands of jobs remain unfilled. In some instances applicants don't have the skills, technical or personal or whatever, necessary to do the job. In some cases, the wages are low, the job is disagreeable or the hours bad. The soft housing market keeps some unemployed from moving to an area where they could get a job. Some employers are reluctant to add more people when there is such uncertainly about taxes and health care. The overall view is that the economy is simply not creating enough jobs to make any real dent in unemployment and many observers don't see any change in the situation anytime soon.

As for foodservice, once again the seasonally adjusted numbers from the Labor Department show operators are continuing to add staff. In November, the industry added 8,600 jobs or about 6 percent of the total increase in employment. A quick, non-scientific poll of a few restaurant managers found that all are looking for people. The downside is, according to one chain restaurant manager, he has to turn some highly qualified people because he doesn't have open positions to hire them all.

Economic News This Week:

  • The Reuters/ University of Michigan preliminary December Consumer Index provided a nasty surprise when it fell to 74.5 from the final November result of 82.7. Perhaps a lot of people suddenly became aware of the impending potential disaster with the fiscal cliff. The Gallup Poll had contrary results with economic confidence in November the best in four years and remaining generally stable throughout the month.
  • The Institute for Supply Management Non-Manufacturing Index (which covers service businesses) inched up slightly in November to 54.7 from 54.2 in October. Any number in excess of 50 indicates expansion.
  • Factory orders in October increased 0.8 percent, with capital goods up a strong 1.8 percent, according to the Department of Commerce.
  • Consumers increased their debt in October by a hefty $14.2 billion according to the Federal Reserve. Non-revolving credit such as car loans and tuition loans continued to grow while credit card debt, which had been declining recently, took a sharp jump up $3.4 billion.
  • Median household income is essentially flat based on a recent Census Bureau report. Median household income in October was $52,089, up from the year's low of $50,757 in April and $51,089 a year ago. Still income remains significantly below the $54,761 it reached in October 2007.
  • Productivity increased 2.9 percent in the third quarter, according to Bureau of Labor Statistics. The theory is that increased productivity eventually leads to higher profits and higher wages.
  • Holiday retail sales results seem to be mixed with some sources very enthusiastic and other reports more pessimistic. Bloomberg News quoting comSource, Inc. said Cyber Monday sales were up 17 percent over last year while the Gallup Poll said sales the last week of November were down vs. a year before.

Foodservice News This Week:

  • McDonald's sales bounced back in November, beating most estimates for same store sales. After falling 2.2 percent in October in the U.S., McD's reported a 2.5 percent increase in comparable store sales for November. A number of projections had comp store sales still negative. Worldwide, comp store sales were up 2.4 percent with total sales up 3.2 percent or 4.8 percent in constant currencies.
  • C-store traffic declined by 2.1 percent in the third quarter, according to The NPD Group. The fall in traffic was blamed on increased gasoline prices as well as competition from other retail channels.
  • Tesco, the London-based giant retailer, may be close to shutting down or selling their US division, Fresh & Easy. The "small supermarket" stores were known for their extensive, quality take out meals. Tesco had invested $1.6 billion in the US operation's 199 stores but never turned a profit.
  • Smashburger received recognition for job creation from the Merrill Lynch-sponsored Hire Power Awards hosted by Inc. In this, the inauguration of the program, Smashburger placed ninth on the list for creating 995 jobs in the last 3 years.
  • Domino's is struggling with meeting the calorie posting requirement of Obamacare. Their CEO said that the chain has "33 million ways to sell a Domino's Pizza" so complying with the listing regulation is "a bit difficult."
  • Darden retreated a bit from their previous position on Obamacare by stating they would not convert any current full time employee to part time jobs in order to avoid paying for their healthcare benefits.
  • California Pizza Kitchen has opened a flagship restaurant in Sunrise, Florida. The location offers less structured indoor seating as well as other décor and menu changes. The company did not indicate if the new restaurant's changes would be expanded to other locations or what the costs are.
  • Growth Chains: Fatburger has signed an agreement with a franchisee to open 10 restaurants in Manhattan. Burger King returned to France after a 15-year absence with the opening of 2 locations. Speedway is looking at sites in the Pittsburgh area for adding up to 7 locations. Jersey Mike's Subs is planning on opening 25 stores in the New York City area. Thornton's is expanding into the Tampa-St. Petersburg- Clearwater area with 15 to 20 units. Starbucks has set a goal of adding 3,000 stores in North and South America with half to be in the U.S. Dunkin' Donuts has signed an agreement with their franchisee in the Austin, Texas, area for 21 traditional Dunkin' Donuts restaurants and 3 Dunkin' Donut/Baskin Robbins stores.
  • Comparable Store Sales Reports: Good Times Burgers (down 0.9 percent) and McDonald's (up 2.5 percent).

For details and comparable store sales of other chains, please click here for the Green Sheet.

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