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Olive Garden just confirmed an exciting trend underlying the job market

Nicole Sinclair
Markets Correspondent
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5.4 million Americans were hired to start a new job in February, a post-recession high. That’s according to the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), which Fed Chair Janet Yellen has cited as one of her favorite labor market indicators.

That report also noted that the total quits rate for the month also rose to 2.1%, up from the previous month’s 2.0%, which reflects increasing worker confidence.

“The trend is rising as low unemployment makes people more confident about leaving their current jobs,” said Pantheon Macroeconomics’ Ian Shepherdson.

Meanwhile, commentary out of casual dining name Darden (DRI) further emphasize the trend of rising employment confidence, an important indicator of the health of the economy.

“I would say that turnover in the industry is up,” said Darden CEO Eugene Lee. “Our gap to the industry continues to improve, but our turn-over’s up. And I talk about that as I think the restaurant employee is a little bit more mobile today. I think that there’s people who were working in our industry because other alternatives weren’t available to them. And I think those other alternatives today are starting to become available.”

Lee added that this could create some margin pressure for the chain, something that has been challenging for a range of retail and consumer names. “It’s going to put a little bit of pressure on wage rate as the industry competes for the best talent to run their businesses,” he said, adding that he thinks Darden’s compelling employment proposition gives them an advantage.

But mandated wage increases aren't affecting profitability at all restaurants yet.  “The other thing to point out is when you look at Darden’s footprint, we have a great footprint and operate a lot of restaurants in markets where we still have federal minimum wage in those states. And that’s really offset some of the other mandated wage increases that are happening in some of the other states.”

The company reported strong third quarter same-store sales growth of 6.8% at its core Olive Garden chain, with activist investor Jeff Smith resigning as Chairman of the Board a year and a half after ousting the company’s board. Darden’s latest results mark significant progress for the company, with stronger trends across its 1,500 restaurants. Smith, who is head of Starboard Value said he is "able to move on to other projects at this time because of the outstanding chemistry and capabilities of both the board and management.”

The bottom line: Darden has turned itself around, and just as Starboard’s Jeff Smith is cheering, so are the chain’s employees… all the way to other jobs. This is a trend across companies that may be the secret sauce behind recent jobs momentum, including last week’s strong March report.