By Matt Dolly
September 06, 2019
The healthy jobs report for August and continued growth allay fears the economy is entering a recession. Going forward, job numbers could be inflated due to hiring for the 2020 Census. However, the August jobs report is likely strong enough for the Fed to cut interest rates by a quarter-point, which should benefit the commercial real estate industry.
Some highlights from the report include the jobless rate, which remained at a 51-year low in August as only 3.7% of the workforce remained unemployed. Total employment grew by a modest 130,000 new jobs, less than the expected 158,000 jobs anticipated. In addition, 96,000 new jobs were added in the private sector, nearly half of what was reported by ADP. The average monthly gain for 2019 is 165,000 jobs, which is less than the monthly average from a year ago but higher than the 100,000 new jobs needed per month to absorb new employees. August reported a strong workforce participation rate with a 20-basis-point increase, representing a gain of 50 basis points during the past year. The service sector spearheaded growth, accounting for 88% of the increase in jobs, led by healthcare and business services.
The office real estate market should benefit from the 52,000 jobs added to the professional and business services and financial sectors. The professional and business services sector added 37,000 new jobs, a stronger performance than its average of 33,571 jobs through the first seven months of 2019. There is a push to create technology jobs in rural areas, which bodes well for small office markets in middle America.
The industrial real estate market is expected to remain strong despite minimal change in job growth for the construction, manufacturing, transportation and warehousing industries. However, there is some concern around the slow growth of the manufacturing sector, which added only 3,000 jobs. This contributed to an average monthly gain of 6,000 jobs this year compared to 22,000 last year.
The healthcare sector has not experienced a month of job loss since January 2014. In August, 24,000 new jobs were added in healthcare, including 13,000 new jobs in social assistance as there has been a trend toward home healthcare. Going forward, this sector should remain the most consistent job market in the United States, a good sign for medical real estate demand.
Despite retailers reporting strong sales numbers, retail jobs declined as continued advancements in technology and a shift to online sales reduce the headcount requirements for the brick-and-mortar stores.
Matt Dolly leads research for the New Jersey office. He delivers local and national reports on commercial real estate and economic trends.
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