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Friday, March 16, 2012

Norris: Full Service Restaurants and Okun's Law

by Calculated Risk on 3/16/2012 08:29:00 PM

From Floyd Norris at the NY Times: In Sit-Down Restaurants, an Economic Indicator

Over the 12 months through January, sales at what the government calls full-service restaurants were 8.7 percent higher than in the previous 12 months. That was the fastest pace of growth since the late 1990s, when the economy was booming. Moreover, as is seen in the accompanying charts, that rate was much greater than the rate of growth in sales at limited-service restaurants.

Since those numbers became available 20 years ago, that difference has been a reliable indicator of how the economy is going. In tough times, people may still eat out, but they cut back.
The numbers Norris is using are from the Census Bureau's Monthly Retail Trade Report and released with a lag.

Norris points out the full service restaurants are performing better than the economy (just like the current debate about Okun's law, see Jon Hilsenrath's Piecing Together the Job-Picture Puzzle and Tim Duy's Thoughts on Okun's Law).

Norris wonders if the improvement in full service restaurants suggests upward revisions when the 2011 benchmark revisions for GDP are released in July. Maybe.