August 2, 2013
July hiring fell short of expectations, but when viewed alongside the steady decline in initial unemployment claims, the trends point to a resilient and steadily improving employment market. With the expansion of payrolls last month, the economy remains on track to add about 2.5 million jobs in 2013, easily outpacing last year’s total. The solid, though unspectacular, pace of hiring in July will also reduce suspicion that the Federal Reserve will intervene and prematurely end its bond buying programs.
U.S. employers added 162,000 jobs in July, primarily in private-sector industries with eight of 10 sectors adding workers last month. Gains were led by professional and business services, together with trade, transportation and utilities. Manufacturers added to the momentum, creating 6,000 jobs in July following four months of losses. Automakers continue to report strong sales, which will sustain production and employment along their supply chains in the coming months, while a rise in an index of manufacturing activity indicates that a broad array of industries are performing well. Education and health services, a consistent source of job creation throughout the recession, grew by 13,000 workers last month, helping to offset small drops in construction and other services.
The steady improvement in the job market continues to buoy the mood of consumers and is supporting job growth in several sectors. Higher consumer confidence and a consistent rise in consumer spending is generating more trips to shopping centers and malls, contributing to a gain of nearly 47,000 retail positions last month and 187,000 positions year to date. Consumers are also eating out more frequently, helping generate an additional 38,400 jobs at bars and restaurants in July and nearly a quarter of a million posts thus far in 2013. Hotels have also added 9,900 workers year to date as travel volume and room demand grows.
Impact on Commercial Real Estate
Hiring in consumer-related segments of the job market bodes well for further strengthening in the retail property sector. National vacancies at shopping centers slipped 10 basis points in the second quarter to 10.6 percent, with the limited construction supporting additional tightening. By year end, vacancies should fall an additional 60 basis points to 10.0 percent, bolstering the prospect of rent growth.
Full-time, office-using employment remains a bright spot in the economy. Employers in primary office-using employment sectors hired more than 52,000 workers in July, capping nearly two years of steady job creation. Job growth in these sectors has yet to translate into significant new space requirements, but the constant backfilling of under-utilized space with new hires suggests that employers will soon consider expansions. This year, national office vacancy is on track to fall 70 basis points to 15.9 percent. Construction is limited and does not promise to impede additional declines in vacancy next year.
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The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.