September 8, 2014
- Lackluster hiring in August slightly dimmed the warm glow cast by recent upbeat reports on other segments of the economy but ultimately will have little effect on economic growth in the second half of 2014. Average monthly job gains this year exceed the levels recorded one year ago, and U.S. employers remain firmly on track to add 2.7 million jobs this year. Job creation will accelerate in the months ahead, but the gradual tightening of the labor market will not force the Federal Reserve to alter its timeline for raising its benchmark interest rate.
U.S. employers added 142,000 positions in August, including 134,000 posts in the private sector. Only information services, a sector that mainly encompasses media, cut jobs last month, while manufacturing payrolls were flat because of regular summer plant closures. Among the expanding sectors, 47,000 workers were hired in professional and business services, which includes many degreed, well-paying positions. Staffing at healthcare providers continues to grow, while 20,000 construction jobs were also added. Residential building, especially in the multifamily segment, continues to rise and will support additional hiring in the months ahead.
Momentum continues to build for solid economic growth in the near term. Widely watched gauges of manufacturing and service sector activity reveal that expansions remain firmly on course, and a steady rise in new orders will support additional hiring and spending in the months ahead. Despite the drab headline number in the employment report for August, labor market conditions are also improving, a trend best illustrated by recent declines in layoff announcements and initial unemployment claims. Hiring is generally rising, while a consistent rise in the number of workers purposely quitting jobs underscores a greater level of worker confidence in their ability to find employment.
Impact on Commercial Real Estate
U.S. retail property vacancy dipped 20 basis points in the second quarter to 6.9 percent behind a modest improvement in space demand and limited supply growth. Retail establishments cut jobs in August, and hiring thus far in 2014 lags the pace set in the first eight months of last year. The pace of store openings may be slowing as vacancy tightens, thereby limiting the number of layouts that meet the needs of expanding retailers. Vacancy will tighten further in the second half of 2014, while the average rent will grow 2.5 percent for the year.
Greater hiring this year continues to relieve pent-up demand for rental housing and has contributed to a 60-basis point plunge in the national apartment vacancy rate to 4.4 percent in the second quarter. However, multifamily construction as a percent of all residential building remains near an all-time high and shows no signs of abating. Accelerating deliveries of rentals will raise national apartment vacancy to 5.2 percent at year end, 20 basis points more than the year-end 2013 level.
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