And Now For The Bad News

And Now For The Bad News

And now for the bad news.

Although August’s retail sales report was upbeat and will likely allay fears of an imminent, severe slowdown in the world’s largest economy, where consumption is (basically) all that matters, spending at restaurants and bars was flat last month.

That’s notable. Recall that August’s disappointing jobs report showed leisure and hospitality hiring flatlined. More to the point, 42,000 jobs were lost in food services. It was the first decline since the winter COVID wave.

When considered in conjunction with the drop in spending at restaurants and bars (figure below), nobody will blame you for harboring doubts about the services sector.

“While spending on goods was much stronger than we anticipated… the flatlining of spending in restaurants and bars suggest that the broader recovery in services consumption probably faltered,” Capital Economics said Thursday.

On some interpretations, it could have been even worse. “Food service was flat on the month despite Opentable data showing sharp falls in restaurant diner numbers,” ING’s James Knightley remarked.

This probably isn’t tenable. The total shortfall in employment versus February 2020 levels stood at 5.3 million as of August’s NFP report. The shortfall in food services and drinking places is nearly 1 million (figure below).

Goldman, Morgan, JPMorgan and others have all cut their estimates for Q3 US growth over the past several weeks. Goldman is particularly concerned about the consumer, who faces “a harder path ahead.” The Delta variant is widely cited as an aggravating factor.

Meanwhile, jobless claims rose slightly last week. 332,000 Americans filed for unemployment benefits, 20,000 more than the previous week’s upwardly-revised 312,000.

Still, initial claims remain near a pandemic low (figure above).

Continuing claims were 2.67 million for the week ended September 4. As of August 28, ongoing Pandemic Unemployment Assistance and PEUC claims were 5,487,233 and 3,805,795, respectively.

In the weeks and months ahead, we’ll find out whether the expiration of emergency programs forces labor back into the “loving” arms of capital. Job openings in food services stood at a record on the last business day of July.


10 thoughts on “And Now For The Bad News

  1. We were on vacation with friends for two weeks and ate out once: menu prices are too high and the markup on wine is outrageous. It helped that my wife and our friends are maestros in the kitchen.

  2. The reality of the pandemic (in the form of the Delta variant) continues to impose itself on our people and our economy. But I’ve heard comment from Dr. Fauci, and other medical authorities on various talk shows who point out that we’re peaking now and Delta will subside.

    Though other variants may arise and spread, one can hope that the terrible devastation reaped by Delta in the unvaccinated, and the requirement for working people to be vaccinated will result in significant, expanded acceptance of vaccinations. We’ll probably have to take booster shots on an ongoing, annual basis. But we have reason to hope that we can put the pandemic behind us and realize greater freedom to grow the economy.

  3. All of my friends in their 50s and 60s prefer dinner parties at this point in time. My two nieces told me they have learned how to cook during Covid.
    Just when American dining became good anywhere you went.
    Mr. H has previously mentioned that a lot of the spending at bars and restaurants were people that work there themselves. I remember that from my stint as a bartender. Money multiplier at work.

  4. I’m in Hawaii on vacation. My family and I are eating out when there is outside dining, cooking in condo or ordering to go. However, the better restaurants are packed and it is hard to get reservations.
    $500 fine to business owners for allowing unmasked inside….$50 fine for the individual.
    I live in Seattle. 300% markup on wine is typical and with 15/hr. minimum wage we have been used to higher restaurant prices since before the pandemic.

  5. Until Coronavirus under better control dining out and bar visitations will continue to lag as the risk reward proposition still skewed to risk, … at least for the informed and reasonably cautious populace…

  6. H-Man, It could be a chicken wing problem. My youngest tells me in his last foray into his favorite watering hole in St. Pete, 12 wings were commanding $30. Toss in a couple of brews and you have sticker shock.

  7. Could it be that business lunches and dinners are a thing of the past? I had never met a leg humper that didn’t want to take clients out for a business lunch or dinner until in person sales meetings migrated to Zoom.

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