Fast-Casuals' Earnings Reports Confirm Labor Market Concerns Flagged by Fed

11:28 AM EST, 11/07/2025 (MT Newswires) -- Several fast-casual chains recently cited poor sales to younger adult consumers, a key cohort for the industry, in an apparent confirmation of the labor market concerns the Federal Reserve has cited as it started cutting interest rates.

Relative to other groups, young adults entering the workforce have been hit acutely hard on several fronts: persistently high inflation, ongoing student loan repayment and a low-churn labor market that is limiting work opportunities.

Companies have largely stood pat with respect to their workforces as they try to navigate a highly uncertain economic environment. The lack of openings means newcomers are unable to get a foot in the door.

"You've got a low-firing, low-hiring environment," Fed Chair Jerome Powell said in September during a press briefing after the central bank's decision to lower rates by 25 basis points.

Overall unemployment, at 4.3%, remains relatively mild, but the underlying labor-market weakness "could very quickly flow into higher unemployment," Powell said at the time. The Fed followed up with another quarter-point cut in October, citing similar concerns.

"Although official employment data for September are delayed, available evidence suggests that both layoffs and hiring remain low, and that both households' perceptions of job availability and firms' perceptions of hiring difficulty continue to decline," Powell said in October. "In this less-dynamic and somewhat softer labor market, the downside risks to employment appear to have risen in recent months."

Chipotle Mexican Grill (CMG) , Shake Shack (SHAK) , Cava Group (CAVA) and Sweetgreen (SG) recently reported earnings results in which they flagged challenges associated with their lower-income and younger customers.

Chipotle Chief Executive Scott Boatwright said on the earnings call that the Mexican-food maker is seeing a "significant pullback" from people earning less than $100,000 annually. In addition, the 25-to-34 age group, which accounts for about 25% of total sales, "has pulled back meaningfully," he said.

Sweetgreen (SG) Chief Financial Officer Jamie McConnell said customers in the 25-to-35 age range makeup 30% of the company's consumer base and have cut back by 15%.

Gregory Daco, chief economist at EY-Parthenon, told MT Newswires in an interview that the company commentary matches what he's heard from the Fed as well as what he's seen in his own research, which shows that, nationally, hiring is at a 17-year low, or 13 years excluding COVID-19.

"It is historically quite low, and that tells me that a college graduate or somebody trying to enter the workforce is going to be facing increased difficulties in finding a role," Daco said. "In turn, that affects spending patterns of these younger-age cohorts."

Daco credited broad-based tariff policy uncertainty, the increased cost of trade and the immigration crackdown as key drivers of the hiring slowdown. He expressed more uncertainty when assessing the role played by artificial intelligence.

"I would be cautious with assuming this is the result of the AI investment wave that we're seeing," he said. "I think we're still too early on in the race. Some companies are moving to more efficient growth models where there is more focus on AI and how AI can help, to some degree, substitute for talent and, to some degree, how it can help augment talent."

In addition to the lack of job opportunities, young professionals, who typically are on the low-end of the income spectrum, are also inordinately affected by inflation, which has remained stubbornly above the Fed's 2% target for a prolonged time period, Stifel Financial Chief Economist Lindsey Piegza told MT Newswires.

"Consumers at the lower end are more price sensitive, so any type of inflationary pressure is going to have a disproportionate impact because you're eating up a larger percentage of purchasing power," she said. "They have less of an ability to absorb any type of price increase, let alone a price shock."

On their earnings calls, the big fast-casuals laid out plans to help incentivize the return of their younger customers. Chipotle's Boatwright noted the company's "Summer of Extras" promotion that successfully re-engaged the cohort and that it will use to inform its 2026 digital strategy. Shake Shack (SHAK) CEO Robert Lynch said the company recently shifted its awareness building and media to promoting its in-app value platform and has seen over 80% growth in its app traffic sales. Cava (CAVA) CEO Brett Schulman highlighted the company's loyalty program as a way to create greater value and communicate directly with its customers.

"It's incumbent upon us to continue to double down on our experience and our value proposition and make sure we're communicating that effectively," Schulman said.

The Cava (CAVA) CEO said the company must continue to challenge the perception that their meals can cost as much as $20, while also emphasizing the quality of Cava (CAVA) ingredients.

"We're not oblivious to the commentary about the $20 lunch, (but) the reality is, you can get a chicken bowl at Cava (CAVA), with all the toppings included ... for $10.65 to our highest price of $12.95 in New York City," Schulman said. "That's a sub-$13 bowl in the most expensive market, not a $20 lunch, and that's an opportunity for us to continue to communicate that it's fresh food; it's not freezer-to-fryer food or ultra-processed food."

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