4 October 2019

Executive Summary

  • 136,000 new jobs were created in September, below expectations of 145,000.
  • The unemployment rate fell to 3.5%—a 50-year low—and the labor force participation rate remained at 63.2%.
  • Average hourly earnings were up by 2.9% over the past 12 months, falling below 3% for the first time this year. This will give the Fed room to further cut rates without stoking inflation.
  • Revisions to July and August combined added 45,000 jobs beyond initial reports and put both months above their respective expectations.
  • September marks 108 consecutive months of job growth—the longest stretch in U.S. history—and the unemployment rate hit its lowest point since 1969.

Commercial Real Estate Highlights

  • Office: Hiring in office-using sectors was mixed in September. Professional & business services added 34,000 jobs, but financial services added only 3,000. This brought the three-month averages down to 38,000 and 12,300 per month, respectively.
  • Industrial: Hiring in warehousing & storage jobs increased by 3,400 in September, above the three-month average of 2,800. The manufacturing sector lost 2,000 jobs in September, bringing the three-month average to just 1,300 new jobs per month. Softness in the manufacturing sector has been broadly observed as trade tensions weigh on the sector. These on-going issues will continue to pose risks to industrial markets.
  • Retail: Food & beverage (F&B) employment remained positive in September with a small increase of 1,500 jobs. Employment in the broader retail sector remained soft and was down by 11,400 jobs for the month. Three-month averages show an average monthly gain of 1,300 F&B jobs and a loss of 6,500 retail jobs.
  • Construction: The construction sector added 7,000 jobs in September, well above the three-month average of 2,700 per month.
  • Health Care: Growth in the health-care sector remained healthy with 38,800 jobs created in September, beating the three-month average of 36,300 jobs per month.
  • Multifamily: Continued resilience of the labor market, unemployment at a 50-year low and continued wage gains all support multifamily market fundamentals.
  • Hotels: Continued gains in the office-using sectors will support demand from business travelers, although heightened uncertainty may begin to weigh on such travel as businesses become more vigilant about expenses. Leisure travel will remain supported by positive labor market dynamics and high consumer confidence.

The Bottom Line

September’s jobs report shows resilience in the labor market, as new entrants continue to be absorbed. Nevertheless, softness in the manufacturing sector amid on-going trade tensions and slowing global growth all pose notable risks to the outlook. Importantly, September’s jobs report does not inhibit the Federal Reserve’s ability to deploy monetary policy as a buffer against these risks.

The strong labor market continues to buoy consumer spending and, coupled with expected Fed rate cuts, underpins CBRE’s outlook for continued but slowing growth in 2020. Current economic conditions are generally supportive of real estate markets, even as pockets of risk appear amid headwinds.

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