Executive Summary

  • 312,000 jobs were created in December 2018, far surpassing expectations of 176,000 jobs.
  • The national unemployment rate ticked up to 3.9% as the labor force participation rate increased slightly to 63.1%.
  • Positive but moderating jobs growth is expected in H1 2019.

Commercial Real Estate Highlights

  • Retail: Added 92,000 jobs in 2018, showing resilience in the sector.
  • Office: Added 693,000 jobs in 2018, bolstering demand for office space and new construction.
  • Health Care: Enormous job driver in 2018 (346,000 jobs) and will remain strong with an aging demographic.
  • Construction: Added 280,000 jobs in 2018; wage inflation in skilled construction trades will remain an issue for commercial real estate developers.
  • Industrial: Manufacturing added 284,000 jobs in 2018, most of which were in durable-goods industries.
  • Multifamily: Residential construction jobs increased at a more rapid pace than non-residential construction jobs in 2018.

The December jobs report comports with CBRE’s view that the U.S. economy remains strong and still has potential for further growth. This strength has been reflected in jobs that impact U.S. property markets, especially within office, health care, construction and manufacturing. December’s jobs report bodes well for demand across property types as employment gains were broad-based. Healthy wage growth and an increase in the labor participation rate were further indicators that the labor market is strong, carrying implications for future Fed policy.

A key risk factor is the wage inflation rate of 3.2%, which could cause the Fed to raise interest rates too quickly. The Fed has signaled that it expects to raise rates two times in 2019, though the market may expect less, particularly with indicators like the ISM Manufacturing Index showing less robust growth than earlier in the year. The potential for a deeper China/U.S. trade dispute is also a risk. Given that trade issues may not be resolved before March, market volatility likely will continue at least until then.

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