While the economy is remaining strong for now. Consumers are financially optimistic due to the low unemployment rate. However, as measured by the Consumer Confidence Index’s “Expectations Index”, this was tempered after the recent market slide at the end of 2018, suggesting that expectations have weakened. The U.S. GDP is still expected to remain above 2% in 2019.
Impact on Foodservice
How should operators interpret the underlying economic data when thinking about the day-to-day and long-term health of their operations? Consumer confidence is a powerful predictor of spending; however, this optimism has not carried over to all segments of foodservice. While upbeat consumers will continue to utilize foodservice at a growing rate, they will diversify their spending in a variety of channels (grocery stores, meal kits, C-store, vending, etc.). Many consumers will continue to focus on value, particularly if they feel less certain about the future.
Wages have risen in certain areas of the country, but so has the wage gap which is inhibiting a large segment of the population from dining at restaurants, particularly at full-service restaurants (FSRs). The widening income gap is one reason why the industry is seeing consumers spending more on a per check basis, but traffic remaining flat.
The Labor Shortage
Next, consider the interplay of a strong economy and the low unemployment rate. On one hand, consumers are working more, which means they have more income and less time to cook at home which should be a boon to the foodservice industry. The significant downside of the low unemployment rate to foodservice operators is the tight labor market.
The labor shortage is the number one concern of foodservice operators across all segments and threatens industry growth. Even with mandatory minimum wage hikes, potential foodservice employees are finding work elsewhere due to the strong economy, particularly in emerging “gig-economy” jobs like ridesharing and third-party delivery which allows flexibility and increased income potential. There are also fewer teens in the workforce which had traditionally been a source of foodservice employees, particularly during the summer boom. These economic factors, as well as changes to immigration policy, have left operators with a dwindling pool of workers.
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