As consumers grow more nervous about unemployment and stay tight-fisted in their spending, a foodservice sales recovery, or an economic turnaround in general, will remain in the distance, a new report from Technomic Inc. suggests.
The current broad unemployment rate, which includes not only those who have lost their jobs, but also workers who are underemployed or discouraged, has reached 15.8 percent and is rising, according to a July Technomic report from the firm’s consulting economist, Arjun Chakravarti.
“The length and depth of recessions are based largely on the efficiency of the labor market,” Chakravarti, with the University of Chicago Booth School Of Business, said in the Technomic report. “Consumer anxiety will remain connected to their prospects in the labor force, and the likelihood of layoffs, unanticipated part-time work, and slashed benefits will promote a continued culture of restraint for what consumers deem non-essential spending.”
While the reported national unemployment rate hit a 26-year high of 9.5 percent in June, Chakravarti’s report says there are additional factors that negatively affect the labor market, such as the erosion of real wages as raises are frozen and benefits are cut, or a growing likelihood of mismatched skills throughout the job market as people take jobs they normally wouldn’t consider. Including these groups of workers who are deemed discouraged or underemployed, the broader unemployment rate could reach 17 percent by the end of the year, the report said.
The prolonged climb of unemployment in the United States has not only affected the spending habits of those without jobs, but also has changed the spending habits of those who remain employed “by spreading psychological uncertainty across all workers in the economy,” Chakravarti said.
“These collective threats will delay an economic recovery by inhibiting consumer spending, increasing precautionary savings, and delaying retirement dates across all levels of the economy,” he said.
Chicago-based Technomic, a foodservice consulting and research firm, debuted its new newsletter on the economy with this look at unemployment.