February 7, 2020

Executive Summary

  • 225,000 jobs were created in January, far surpassing expectations of 158,000.
  • November and December employment reports were revised upward by a combined 5,000 jobs, putting the three-month average at 211,000 per month.
  • The unemployment rate edged up to 3.6% due to an increase in the labor force participation rate to 63.4%.
  • Average hourly earnings were up by 3.1% over the past 12 months. Wage growth back above 3% is a notable confirmation that a dip below that level in December was an aberration.
  • Employment growth was strong, but wage growth remains at levels that give the Fed room to loosen monetary policy if economic conditions warrant.
  • January marked 112 consecutive months of jobs growth—the longest stretch in U.S. history—and the unemployment rate remained close to a 50-year low.

Commercial Real Estate Highlights

  • Office: Hiring in office-using sectors was mixed. Professional & business services added 21,000 jobs but financial services lost 1,000, bringing their respective three-month averages to 24,000 and 5,300 per month.
  • Industrial: Warehousing & storage jobs increased by 5,700 in January, bringing the three-month average to 2,300 per month. The manufacturing sector lost 12,000 jobs as the impact of trade tensions and Boeing’s 737 MAX problems continued to reverberate, bringing the three-month average to 13,700 jobs per month.
  • Retail: January’s employment report showed a mixed picture in retail. Food services & drinking places added 24,400 jobs for the month, but the broader retail sector lost 8,300 jobs. Over the past three months, food & beverage had an average monthly gain of 21,100, while the broader retail sector had 7,600.
  • Construction: The construction sector added 44,000 jobs in January, well above the three-month average of 17,700 per month.
  • Health Care: Growth in the health-care sector remained strong with 35,500 jobs created in January, beating the three-month average of 32,000 per month.
  • Multifamily: Drivers of multifamily demand are strong. A still-strengthening labor market will support continued household formation over the short-term. Over the longer term, housing affordability challenges will lead to stronger rental demand.
  • Hotels: Overall, the strong jobs report likely will boost business sentiment and support demand from business travelers. Nevertheless, the spread of coronavirus could lead to fewer tourists from Asia and weigh on the sector. Robust jobs growth and wage increases should encourage strong levels of leisure travel by Americans.

The Bottom Line

January’s addition of 225,000 jobs was well above expectations. Wage growth remained healthy at 3.1% but was not enough to change inflation expectations or limit Fed policy moves. Growth was positive across most sectors, but the picture was somewhat mixed. There was notable weakness in manufacturing as the impact of trade tensions and continued problems with Boeing’s 737 MAX aircraft weighed on the sector.

CBRE expects healthy economic growth of 2% in 2020. As trade tensions ebb and U.S. consumers remain well-positioned, there is upside potential for growth. Nevertheless, January’s jobs report will not constrain the Fed’s ability to respond if economic conditions deteriorate or if large exogenous shocks occur, such as a worse-than-anticipated spread of coronavirus. With strong commercial property market fundamentals, January’s employment report reinforces CBRE’s view that 2020 will be a good year for real estate.

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