Published on Tuesday, 08 July 2014
Written by Jerry Stiegler
This week we look at U.S. employment news from various sources, including healthy hiring by the foodservice industry, provide a look at the troublesome food commodity prices and a whole lot more.
This post represents one of those rare offerings when the vast majority of the news is not just positive but very positive. This is certainly true of the employment stats. Employment in June was way up and unemployment was way down. Great news, right?
Yeah…but some nagging problems remain. While falling steadily of late, long-term unemployment (those without work for more than 27 weeks) remains high at 3.1 million. This becomes more troubling upon factoring in how long it’s been since the recession ended. The number of part-time workers who want to work full time actually rose in June to 7.5 million.
And a statistic that bothers some economists is the average workweek has been stuck at 34.5 hours for the last 4 months. This could indicate that the job market will remain weak and June’s good news will not continue.
Now it is true that the stock market loved the employment news so much last Friday that the Dow Jones Industrial Average punched throught the 17,000 ceiling. But, just a few days before the Bank for International Settlements, which is a coalition of central banks, noted that the “euphoria in financial markets” is out of touch with the frail economy and that companies are buying back their own stocks and engaging in mergers and acquisitions rather than adding production capacity.
Economic News This Week
- The June ADP National Employment Report projected the economy added a strong 281,000 jobs last month. Small- and medium-sized employers accounted for more than 80 percent of the new jobs. Also worth noting, 36,000 of the new positions were in the construction industry.
- Government employment numbers showed a significantly improved job market in June. By declining 0.2 percent, June’s national unemployment rate of 6.1 percent was the lowest it has been since September 2008. Nonfarm payroll grew by a hefty 288,000. The private sector grew by 262,000 jobs while various government agencies added 26,000. Continued hiring at this level should lead to a significantly stronger economy.
- The Gallup Organization’s U.S. Job Creation Index remained at a 6-year high in June hitting 27. This index represents the difference between the percent of employees that report their employers are hiring vs. the percent of employees reporting their employers are laying off. In addition, Gallup’s U.S. Payroll to Population Ratio climbed to 45 percent in June after rising to 44.5 percent in May. Gallup measures the percentage of adults (18 and over) who were employed full time. June’s finding is one of the highest rates since tracking began in January 2010.
- Pending home sales increased significantly during May as the National Association of Realtors’ Pending Homes Sales Index hit 103.9, up 6.1 percent over April’s level. However, a spokesman for the National Association of Realtors’ noted pending home sales declined 5.2 percent from May 2013 and said second half growth won’t be enough to compensate for a “sluggish first quarter and will likely fall below last year’s total.”
- May construction spending crept up just 0.1 percent over April but residential construction fared better, rising 1.5 percent for the month.
- Factory orders for May fell 0.5 percent, according to the Census Bureau’s final report. The drop was mainly the result of fewer defense orders. Without defense orders factory orders rose 0.2 percent.
- The Institute for Supply Management’s Production Manufacturing Index for June hit 55.3 percent, a decline of 0.1 percent. The ISM’s report shows manufacturing activity has increased 13 straight months. In addition, the ISM’s Non-Manufacturing (Service) Index retreated slightly in June to 56, down from 56.3 in May.
- U.S. car sales totaled 1.4 million vehicles in June, a 1.2 percent increase that drove the seasonally adjusted annual rate to 16.89 million, according to reports. In the first 6 months of the year, 8.2 million cars and light trucks were sold, a 4.3 percent increase compared to the same period last year.
- The Gallup Organization reports confidence in the U.S. economy once again stayed level. June’s Index was minus 15 after running at minus 14 in May. As previously noted, this index has been remarkably consistent most of this year.
Foodservice News This Week
- Foodservice hiring was strong in June with the industry adding 32,800 jobs or 12.5 percent of the newly created private sector jobs, according to the Bureau of Labor Statistics. In the past 12 months foodservice employment has grown by 314,000.
- Food prices continue to bedevil foodservice operators. Prices for beef and pork are at historic highs and do not appear to be headed down anytime soon. This leaves operators wrestling with how to respond. Some restaurant chains, including Chipotle and Texas Roadhouse, have raised menu prices while others, including Ruth’s Hospitality Group, have negotiated contracts to lock in prices. Others have elected to reduce portions or adjust their recipes. And of course some restaurants just swallow the higher prices and hope that the bottom line doesn’t suffer too much.
- Noodles and Company plans to add an “up-sell” waiter. One aspect of fast-casual restaurants is the lack of a waitstaff. Noodles and Company may change that by testing a free floating server whose job at dinnertime is to push desserts, beer, wine and coffee and bring them to the table. The chain will not expect customers to tip but does expect a 3 percent increase in same-store sales.
- “A more convenient convenience store” called The Cube will open in Norman, Okla., this fall. The co-founder doesn’t like the term convenience store and prefers to call the new drive-thru concept a “neighborhood concierge.” Prepared food offerings include pastries, sandwiches, wraps and pizza.
- Corporate Stirings: Bob Evans’ effort to mollify activist investment firm Sandell by offering the firm 2 seats on the board has been rejected as “meaningless.” Quiznos has emerged from bankruptcy after filing for reorganization in March. Private equity firm Birkshire Partners has made an investment in Chicago-based Portillo Restaurant Group. A family investment fund called Third Lake Capital has acquired Ker’s Wing House of Tampa, Fla.
- Growth Chains: Sonic Drive Ins will open nine restaurants in Pennsylvania in the next four years. KFC has opened its first unit in Bolivia, with a second to follow later this year. CKE, which just added its 600th international location, plans to opening 400 more overseas locations by 2017. Burger 21 signed a multi-unit franchise agreement for three additional units in Atlanta. Blaze Pizza will open 10 stores in Florida.
- Comparable Store Sales Reports: No chains reported same store sales this past week but for the latest same store sales reports, click here for the Green Sheet.