Employment

Ongoing Robust Job Creation a Positive Signal for the Economy, Multifamily Sector

• Employment growth continues at rapid clip. Employers created 678,000 jobs in February, exceeding the 2021 monthly average of 560,000 positions. The strong opening salvo in hiring for 2022 has lowered the unemployment rate to 3.8 percent.
• Broad-based hiring fostering prodigious housing demand. Growing headcounts across multiple sectors are fostering widespread and vigorous household formations. Given a limited number of more costly single-family homes for sale, much of this new housing demand is going toward multifamily options.
• Job creation could hit headwind later in the year. The unemployed population was 6.3 million last month, 600,000 personnel above the February 2020 count of 5.7 million. The number of people who want a job but have stopped looking is also up about 1.5 million relative to the pre-pandemic tally.

Additional Trends:

• Markets improving at varied paces. The national jobs landscape is making tremendous gains, but not every metro is on the same point in the recovery timeline. As of the start of this year, multiple tertiary markets in the midwest and mountain states, as well as Atlanta, were reporting unemployment rates below their February 2020 levels.
• Upward wage pressure persisting. Lagging labor force participation prompted increases to pay last year. The employment cost index at the end of 2021 was up 4.4 percent year-over-year, well above the 2.2 percent average for the decade preceding the health crisis.

Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.

Download the Full Report Here

January Job Creation Highlights Recovery in Key Commercial Property Types

• Employers tackling labor shortage in new year. The job market continued to recover in the opening month of 2022 as 467,000 jobs were created. While unemployment also rose, the labor force participation rate improved by 30 basis points to 62.2 percent, a post-recession high, as wage increases lured job seekers.
• Recent hiring bolsters long-term outlook for office properties. January’s employment gains included 86,000 new professional and business services-related positions, surpassing the February 2020 total by 511,000 personnel. This expansion bodes well for office buildings long term, even though it is unclear how many employees are currently commuting to workplaces.
• Retailers and hotels gain ground as new year begins. Lodging establishments, bars, restaurants and other stores continued to grow staff last month, adding a combined 212,000 jobs across the leisure, hospitality and retail trade sectors. The hiring underscores the ongoing demand for these services that is also reflected in improving property performance.

Noteworthy Trends:

• Continued employment growth validates Fed actions. While the unemployment rate ticked up a mild 10 basis points to 4 percent in January, last month’s overall positive employment report only adds further weight behind the Federal Reserve’s tightening monetary policy.
• Omicron’s impact goes beyond job gains. The creation of nearly 1 million new jobs over the past two months indicates that employers were broadly able to navigate the challenges posed by omicron and grow staffs in the winter months.

Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics;
CoStar Group, Inc.; Federal Reserve Bank of St. Louis; STR, Inc.

Download the Full Report Here

Labor Market Tightens Further, Fostering Upward Pressure on Wages, Interest Rates

• In rare feat, unemployment drops below 4 percent. Employers added 199,000 personnel to payrolls in December, below the 2021 monthly average of 537,000 jobs, while the unemployment rate fell 30 basis points to 3.9 percent.
• Recent hiring indicative of strong industrial space needs. The transportation and warehousing sector grew by 19,000 personnel last month, raising the total headcount to 218,000 above the February 2020 level.
• Office tenants continue to hire staff; in-person return delayed. Ongoing job growth in professional and business services has lifted the traditionally office-using sector close to its pre-pandemic headcount.

Additional Trends:

• Labor participation subdued despite low unemployment. While the unemployment rate has contracted to just 40 basis points above the pre-pandemic rate, labor participation has not fully recovered.
• Falling unemployment bolsters Fed’s policy change. Job openings in excess of job seekers and a sub-4 percent unemployment rate imply the economy is essentially at full employment for the current pandemic situation.

Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics

Download the Full Report Here

Job Growth Tempers in September; Industrial Sector Continues to Outperform

• Hiring slows again in September. The complete expiration of federal unemployment insurance did not translate into accelerated job growth last month as the health crisis continued to present
  challenges.
• Demand for industrial spaces and employees to fill them rises. In contrast to other segments of the economy, the trade, transportation and utilities sector has already surpassed its pre-pandemic
  headcount and continues to grow.
• Vaccine requirements constrain onboarding. After previous strong growth, hiring at bars and restaurants shifted minimally in September. Despite reopenings, some people continue to be wary
  of dining out, while New York and Los Angeles now require proof of vaccination from patrons, limiting visits.

Developing Trends:

• Decisions to not work shrink labor force. While the unemployment rate fell to a new pandemic period low of 4.8 percent, part of the decline can be attributed to a contraction in the size of the
  civilian labor pool.
• Higher wages and other costs impacting company operations. Although hiring slowed last month, shortages in many key positions remain, adding upward pressure to wages.

Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics

Download the Full Report Here

Delta Variant Stalls Service-Related Hiring; Rising Wages Pose New Challenges

• Health concerns slowed hiring last month. Job creation declined substantially in August as 235,000 positions were added, down from the 1.05 million personnel brought on in July.
• Hotels add fewer jobs as summer comes to a close. Up 16 percent so far this year, the leisure and hospitality sector did not grow in August.
• Industrial sector labor needs reflect current economic state. The addition of 40,000 messenger and warehousing jobs along with 11,000 air transportation positions have lifted the transportation and warehousing sector staff count to above the pre-pandemic level.

Developing Trends:

• Wage pressures mount in August. While the employment base remains 3.5 percent below the pre-pandemic level, elevated job openings signal a persistent labor shortage.
• Less hiring, higher pay complicate Fed outlook. The slowdown in hiring may prompt the Federal Reserve to delay updates to its current policies.

Download the Full Report Here

Will the labor shortage impact Commercial Real Estate?

Job Openings Overtake People Looking for Work

• Job openings in June reached record 10M – Previous peak was 7.6M in 2018 under tight labor market
• Roughly 1.4M more jobs available than people looking for work, despite unemployment rate still at 5.4%

Labor Shortage Drag on Economic & Real Estate Recovery

• Some tenant types, like Retail, Hotels and Sr. Housing, unable to hire enough staff to operate at full capacity
• Labor shortages stifle economic growth – Slows demand for Retail, Industrial warehouses, Offices and Apartments
• Construction worker shortage could limit new supply; would benefit performance of existing real estate

Labor Imbalance Could Present New Headwinds

• Competition for talent contributing to rising wages; May further fuel inflation
• Rising inflation could force the Federal Reserve to tighten monetary policy sooner than expected

*Job openings through June; Unemployed through July
Sources: Marcus & Millichap Research Services, BLS

Watch the Video Below