November 2, 2018
  • Headline: The U.S. economy added 250,000 jobs in October, well above the consensus estimate of 200,000. The unemployment rate remained unchanged at 3.7%—the lowest since 1969—while the labor force participation rate increased by 20 basis points (bps) to 62.9%. Hiring figures for September were revised down by 16,000, while those for August were revised up by the same amount. Average hourly earnings rose by 5 cents in October and are up by 3.1% over the year.
  • Executive Summary: Despite recent stock market volatility and potential employment impacts from Hurricane Florence, the October jobs report showed solid gains across all sectors of the economy. Wage growth for the year is reaching post-financial crisis highs, while the unemployment rate remains the lowest in nearly two generations. Although the 10-year Treasury yield was flat for the week, it is up nearly 60 basis points (bps) for the year. The 10-year breakeven inflation rate, a measure of markets’ expectations of inflation 10 years from now, has remained consistently above 2%, the Federal Reserve’s stated goal for inflation.  
  • Wage Inflation: Wage growth now stands at 3.1% for the year. Although this represents an improvement over earlier periods of the expansion, it is not historically commensurate with the current level of unemployment. The most recent time unemployment was near today’s levels—during the dot-com boom—wage growth was in the 3.5%-to-4% range. Nevertheless, consensus among economists is that wage growth should accelerate as the labor market continues to tighten. Overall, today’s jobs report, combined with strong GDP growth, will keep the Fed on track to raise short-term interest rates at least one more time this year and continue to reduce its balance sheet, which currently stands at just under $4.2 trillion.
  • Job Growth Outlook: The U.S. has experienced its longest streak of monthly jobs gains on record. Tax reform is continuing to add stimulus to the economy and could extend the current cycle further. However, additional jobs growth will likely be tempered given that the economy is operating at near-full capacity, an aging population is shrinking the available labor pool and productivity growth is low by historical standards. 
  • CRE Sector Employment:
    • Construction: The construction sector added 30,000 jobs in October and is up by 330,000 jobs year-over-year.
    • Industrial: The manufacturing sector added 32,000 jobs in October and has added 296,000 jobs over the year, much of them in the durable goods sector. Transportation & warehousing added 25,000 jobs, with warehousing & storage and couriers & messengers each adding 8,000 jobs. For the year, hiring in transportation & warehousing has increased by 184,000.
    • Leisure and Hospitality: Leisure and hospitality jobs increased by 42,000 in October, as the impact of Hurricane Florence waned. The other sectors in leisure and hospitality remained unchanged in October.
    • Office: Professional & business services continued trending up in October, adding 35,000 jobs. Over the year, the sector has added 516,000 jobs.