Friday, April 3, 2009

Unemployment; Troubles in the Restaurant Industry

The unemployment rate rose from 8.1% to 8.5% in March; this is the highest it's been since 1983. 663,000 jobs were lost during the month. The administration had predicted unemployment would top-out at 8.9%, which now seems overly optimistic.

Health care was the only sector in which jobs increased. An article in the Times today says that law firms continue to lay off associates and that starting salaries are likely to decrease, significantly, in the coming years.
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In South Carolina, Governor Mark Sanford relented and agreed to accept federal government stimulus funds, although it sounds like he's still arguing about whether a certain portion ($700 million) should be used for debt reduction or for education.

South Carolina has the second highest unemployment rate in the country, after Michigan.

Sanford has a "legendary" reputation for frugality -- he has at times required staff members to use both sides of Post-It notes (this is great - it's the first thing I've ever read about the guy that makes him more rather than less likable).
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Another article in the Times says that restaurants continue to be hit hard by the recession, as people eat out less and less. Over the past couple of decades, the trend had been towards eating out more:
Amid the seeming prosperity of a credit-fueled era, people got in the habit of eating more and more of their meals out. The association’s statistics show that 48 cents of every food dollar is now spent at restaurants, compared with 40.5 cents per dollar in 1985.
The article cites specifically to Outback as one of the chain restaurants that is struggling:
Larger chains have struggled too, particularly those with a more expensive menu than competitors, or onerous levels of debt. Outback Steakhouse is one example. Known for its fried appetizer the Bloomin' Onion and its ostensibly Australian d├ęcor, Outback was taken private in 2007 at the peak of the private equity buying binge, even as the casual dining sector was struggling with sluggish sales. Outback’s owner, OSI Restaurant Partners, now finds itself saddled with debt and declining customer counts.

In early March, the rating agency Moody’s included OSI Restaurant Partners on its list of “bottom-rung” companies that are most likely to default on debt payments. A company spokesman, Michael Fox, said the company had recently significantly improved its financial position by retiring $300 million of debt at a discounted cost of $85 million ... Other restaurant chains on that ignoble bottom-rung list included Krispy Kreme, Sbarro and Arby’s.

The article goes on to point out that one of the restaurants that continues to thrive is McDonald's - this tracks the information in the McDonald's article from January.

175. What percentage of my "food dollars" do I spend at restaurants? I tend to buy pretty simple groceries at the store (except I cannot stop splurging on "Green Goodness" and the other Bolthouse drinks - I just love them), so I imagine it's higher than the average - 65 cents?

176. I've just recently eaten at the Outback and noticed that the Bloomin' Onion was cheaper than it was a few years ago. Was the strategy to lower its price in order to keep people coming back for the actual entrees?

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