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National Restaurant Association - Economist’s Notebook: Economy withstanding fiscal headwinds

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Economist’s Notebook: Economy withstanding fiscal headwinds

In his latest commentary, the National Restaurant Association's Chief Economist Bruce Grindy breaks down the latest economic indicators.  The private sector added a net 246,000 jobs in February, despite the drag of higher payroll taxes.  If the economy continues to cut through the fiscal headwinds and maintain an upward trajectory, the business environment for restaurants should be generally positive in the months ahead.

Thus far in 2013, the economy is withstanding the impact of the payroll tax hike.  The overall economy added a net 236,000 jobs in February, with the private sector responsible for a gain of 246,000 jobs, according to the Bureau of Labor Statistics.  This represented the fourth time in the last five months that the private sector added at least 200,000 jobs, with the total five-month increase topping the 1 million mark.

Job growth was broad-based in February, with professional-and-business services (73,000), construction (48,000), health care (39,000), retail (24,000), restaurants (19,000) and manufacturing (14,000) all posting solid gains. 

Although the fiscal headwinds will intensify somewhat in the months ahead as the sequester-driven job losses and furloughs go into effect, the overall economic recovery does not appear to be at risk.  However, the impact will be real, and the full effect of the sequester is expected to dampen growth by at least 500,000 jobs in 2013.  As a result, it will not be surprising to see somewhat slower overall job growth in the months ahead.

For their part, consumers also were relatively upbeat, at least by post-recession standards.  The Present Situation component of The Conference Board’s Consumer Confidence Index rose in February to its second-highest level since mid-2008.  While it still remains well below what would be expected during a normal expansionary period, the trend appears to be moving in the right direction.

Restaurant spending also held up relatively well in January, despite the reduction in take home pay for most households.  Eating and drinking place sales totaled a seasonally-adjusted $45.7 billion in January, unchanged from December but a solid 6.5 percent above the January 2012 level, according to preliminary data from the Census Bureau. 

Based on the National Restaurant Association’s household surveys, consumers’ pent up demand for restaurants remains relatively high by historical standards.  As a result, if the economy cuts through the fiscal headwinds and maintain an upward trajectory, the business environment for restaurants should be generally positive in the months ahead. 

Monthly U.S. Private Sector Job Growth

Source: Bureau of Labor Statistics; figures are seasonally-adjusted

For additional analysis of restaurant industry trends, log on to Restaurant TrendMapper (subscription required).

 

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