MW This secret ingredient of the economy says things are OK - and no recession is brewing

By Jeffry Bartash

Americans haven't cut out one of their favorite things to do

Americans are still going out to eat regularly despite more worries about the economy.

When the U.S. economy shows sign of stress, one of the first things Americans strike from their budgets are takeout dinners and going out to restaurants. It's one of the best early warning signs of recession.

Well, people are not cutting back much right now, especially wealthier ones. And that's a good sign for the economy amid a turbulent year marked by the return of President Trump, the biggest trade wars since the Great Depression and the latest shutdown of the federal government.

Sales at U.S. bars and restaurants rose 6.5% in the 12 months ended in August, government data showed, up from 4.3% a year earlier. Americans also spent generously on food outside of their homes in the spring and summer.

The restaurant business has shown "surprising resilience despite all the headwinds," said Chad Moutray, chief economist at the National Restaurant Association. "The good news is I don't see a recession - consumers are hanging in there."

Sales and deals

What's keeping restaurants pretty busy?

The economy is still growing, for one thing, and that's kept layoffs and unemployment surprisingly low. Companies see little reason to cut staff when sales are stable and good help is already hard to find.

Americans tend to spend more freely when they feel secure in their jobs, economists point out. Not only that, but incomes are also rising faster than inflation.

What's more, the record boom in the stock market has added a gale-force tailwind to consumer spending, particularly wealthier households.

"The stock market's recent strength has been a significant driver," said Michael Pearce, deputy chief U.S. economist at Oxford Economics.

Consider the strength of online restaurant reservations.

The popular site OpenTable reported that reservations last week were up 12% from a year earlier. Most of the restaurants who partner with OpenTable are higher-end establishments that cater to upper-income Americans.

Fast-food and limited-service restaurants that cater to middle- and lower-income people, for their part, have been able to boost sales by introducing new specials to price-conscious customers.

Take Domino's $(DPZ)$: The national pizza chain saw improved sales in the spring after it introduced new value meals, such as a $9.99 pizza special.

"The winners here are the brands that have done a great job of conveying value," Moutray said.

Changing tastes

That's not to say all is well in the food world - it isn't. Restaurants have struggled this year with rising costs for ingredients such as beef, scarce labor and more finicky customers.

Restaurant owners say customers have adopted all kinds of new habits to try to keep their bills down. They choose smaller portions, split more entrees or even order kids' meals.

In Atlanta, "diners continued to pull back by skipping desserts and alcoholic beverages," the Federal Reserve said in its latest survey of the economy.

All this penny-pinching has reduced the appetite of restaurants and food preparers to hire more workers. The industry employs some 15 million people - or nearly 1 in 10 workers - but new jobs have hardly grown this year.

In the first eight months of this year, bars and restaurants added a mere 13,000 jobs, Bureau of Labor Statistics data show.

By contrast, the industry created 40,000 jobs in the first eight months of 2024 and a much larger 173,000 in the same eight-month period in 2023.

Moutray said foot traffic at restaurants has been flat to negative overall in the early fall, prompting business owners to become more conservative, like their customers.

"More than 70% of owners say they expect to hold hiring flat over the next six months," he said.

Still, sales are holding up pretty well.

Bank of America said credit-card spending at bars and restaurants was up 3.2% in early October compared to a year earlier. That's in line with the trend over the last few years, when the economy was even stronger.

The path forward

So what could go wrong?

Lower-income households are feeling more stress due to rising inflation and a more uncertain economy. They are cutting out trips to fast-food restaurants and buying cheaper foods at supermarkets - so much so that the 1970s stable Hamburger Helper is making a big comeback.

The cost of food has risen so much that even value chains such as McDonald's $(MCD)$ have suffered a decline in traffic among certain segments of the population.

In the second quarter, for instance, McDonald's reported a decline in visits from lower-income customers who have long been critical to its business. The company said it would focus more on promotions to try to lure them back.

"Re-engaging the low-income consumer is critical, as they typically visit our restaurants more frequently than middle- and high-income consumers," McDonald's Chief Executive Chris Kempczinski said last month.

A stock-market meltdown could pose an even bigger threat, since wealthier Americans are the biggest spenders on takeout and fine dining.

Families with incomes of $100,000 or more only represent 43% of all households - but they account for nearly 60% of all restaurant spending, research shows.

-Jeffry Bartash

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October 18, 2025 09:00 ET (13:00 GMT)

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