July 13, 2018 Comments Off on How Does June Jobs Report Affect CRE? Views: 557 Connect Classroom, National News

How Does June Jobs Report Affect CRE?

By Dennis Kaiser

The release of June’s Jobs Report last week revealed a number of interesting statistics. Connect Media asked Cushman & Wakefield’s Kenneth McCarthy to share what all the numbers mean for commercial real estate. Check out his insights in our latest 3 CRE Q&A.

Q: Employment growth was strong for the second consecutive month in June, with unemployment rising from an 18-year low of 3.8% to 4%. What has contributed to the economy’s current pace, and how do fears over worker shortages and a global trade war factor in?
A:
The U.S. economy is seeing strong economic growth driven by high confidence, tax cuts and a supportive global economic environment – and that’s reflected in the employment gains. The increase in the unemployment rate was minor and a result of faster labor force growth, which is a positive as more workers are entering the labor force.

Rising trade tensions create uncertainty, which makes it difficult for businesses to plan, and that could dampen activity and sustained tensions could possibly reduce growth going forward. The impact has thus far been minimal and the economy continues to perform well – again, as is reflected in the employment data. Trade restrictions tend to lead to higher prices domestically and could boost inflation in the U.S.

Q: What, if any, encouraging milestones have we seen for commercial real estate?
A:
All sectors of commercial real estate benefit when economic growth is strong. The growth we’ve been seeing and the overall amount of jobs created have had an impact on demand for commercial real estate. The fact that job growth has accelerated to 215,000 per month this year, compared with 182,000 in 2017, means that economic activity is increasing and that means more real estate is needed.

The number of jobs in office-using industries like financial services and professional services increased by an average of 58,000 per month in 2018, up from 47,000 in 2017. More office-using jobs generally means more demand for office space. The construction sector also added 13,000 jobs in the month, and has added roughly 25,000 jobs per month this year. Since 2011, nearly 1.8 million construction jobs have been added to the economy. These construction jobs reflect the other side of the commercial real estate sector, rising supply of office, industrial and multifamily space coming to markets across the nation.

Q: What, if any, downsides did we see in the June report?
A:
Retail rang in on a slightly negative note, with employment falling by 22,000 jobs. After declining in 2017, the retail sector has seen employment growth in 2018, but it has been modest, reflecting structural shifts within the sector.

The real red flag, if there is one, is rising trade tensions. Any policy that restricts the flow of goods could reduce demand for industrial space, and that could result in a disproportionate impact on that sector.

Read more at BLS June Jobs Report

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For comments, questions or concerns, please contact Dennis Kaiser

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