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National Restaurant Association - Fears of restaurant recession overblown

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Fears of restaurant recession overblown

Continued labor market strength means fears that the restaurant industry is in a recession are overblown, according to the NRA’s Chief Economist Bruce Grindy.  His Economist’s Notebook commentary and analysis appears regularly on Restaurant.org and Restaurant TrendMapper.

Job growth surprised to the upside for the second consecutive month, based on preliminary figures released today by the Bureau of Labor Statistics.  The economy added a net 255,000 jobs on a seasonally-adjusted basis in July, which came on the heels of a robust gain of 292,000 jobs in June.

The two-month print of 547,000 jobs was the strongest since the last two months of 2015, and was well above the average gains of 151,000 jobs during the first five months of the year.

Reading through to the restaurant industry, the latest jolt to the labor market will likely bolster consumer spending in the months ahead.  Restaurant sales are closely tied to employment trends, and the continued labor market strength means fears of a restaurant recession are overblown.

At the onset of the Great Recession in 2008, real (menu-price-adjusted) restaurant sales didn’t start declining until a full four months after the job losses began.  Recent trends suggest that job losses are not on the horizon, which should help allay concerns that the restaurant industry’s expansion has run its course.

Total eating and drinking place sales were up 2.2 percent on an inflation-adjusted basis between June 2015 and June 2016, according to data from the U.S. Census Bureau.  These sales gains were driven largely by the steady, if unspectacular, growth in the economy.  

While the restaurant industry certainly faces a host of challenges, the health of the labor market is not at the top of the list.  As long as the economy avoids a recession, the restaurant industry will avoid a recession. 

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