And now The Cheesecake Factory is talking about the biggest trend in the labour market: wage growth

Cheesecake factory kitchenCheesecake Factory annual reportCooks work in the Cheesecake Factory kitchen.

Wage growth is coming.

The latest big US service sector employer to talk about how wage pressures are coming is The Cheesecake Factory.

On the company’s earnings call (via New River Investment’s Conor Sen), Cheesecake Factory CFO Doug Benn said, “we continue to plan for overall wage inflation of approximately $US12 million, including about $US4 million in minimum wage, reflecting wage rate inflation of about 3%.”

So far, wage inflation has been the missing piece of the economic recovery, rising right around the rate of inflation despite job gains that have been way above trend in the last year. In March, average hourly earnings rose 1.7% over the prior year.

But anecdotal evidence from large service-sector and retail employers like Wal-Mart, Target, and McDonald’s, indicates that company’s are raising wages in response to both minimum wage increases and an uptick in turnover among workers in the industry.

In response to a question from an analyst on the conference call, Cheesecake Factory president David Gordon expanded on the company’s thoughts on wage growth, saying:

On the labour side, I think that we know that we’re going to be managing more wage rate inflation than what we’ve seen in the past. In fact, we have in our plan now the expectations for 3% wage rate inflation which includes minimum wage increases … we are considering taking more pricing than historical this summer when it comes around and perhaps again next year in light of the cost headwinds that we have and that’s particularly related to the ongoing wage rate pressure … So, we haven’t made any decisions yet with specifically what we’re going to do with respect to pricing but we know that that’s a part of the solve, if you will, for higher wage rate inflation.

Elsewhere in the quarter, Cheesecake Factory reported first quarter adjusted earnings per share that came in at $US0.56, topping estimates for earnings of $US0.49. Revenue in the first quarter was a slight miss, hitting $US518 million against expectations for $US520.3 million, while same-store sales rose 4.2%.

In early trade on Thursday, shares of the company were up 4%.

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