October 9, 2014
- Reinforcing the broadening economic momentum, U.S. employers added workers at a brisk pace in September, alleviating disappointment in August’s lackluster hiring report. The steady job gains stand in stark contrast to last year when the looming government shutdown restrained employer additions. Since last year’s shutdown, however, uncertainty has eased dramatically. The establishment of a federal budget and debt ceiling have helped support both business optimism and consumer confidence. Aside from the still-limited wage growth trends, the U.S. economy appears poised to finally begin an accelerated growth trajectory. The economy still faces hurdles, however, as election year politics could once again destabilize fiscal policies and fears of contagion from European economies teetering on the edge of recession erode confidence.
U.S. employers added 248,000 jobs in September, with the growth dispersed across nearly all sectors. Gains in trade, transportation and utilities, and professional and business services accounted for nearly half of the job additions, but other segments also made sizable contributions. Broader availability of healthcare boosted hiring by medical practices and healthcare facilities, which added 32,000 workers. Meanwhile, significant increases in multifamily development contributed 16,000 construction jobs. The manufacturing sector has also supported hiring, with 4,000 new positions last month. The broad-based nature of hiring throughout the recovery reiterates the diverse range of business segments contributing to the momentum, reinforcing the belief that this growth cycle will be sustainable for several years.
Through the first three quarters of 2014, nearly all private employment sectors added staff at a faster pace than they did in 2013. Two retail-related segments, however, slowed their pace of hiring — just 222,000 jobs were created at bars and restaurants in the first three quarters of this year, a decline of about 20 percent from their 2013 pace. Hiring in retail trade also slowed, falling 35 percent from last year’s rate of job creation to 148,000 new positions year to date. Both of these segments led the hiring recovery last year, so the tapering growth rate may simply signal that these fields are finally approaching capacity. Despite this slowing hiring pace, retail assets and restaurant locations both continue to benefit from rising occupancy and rent.
Impact on Commercial Real Estate
Professional and technical services, a leading user of office space, led the employment recovery and maintained steady additions this year. Through September, 217,000 workers were added by this sector, contributing to positive net absorption of office space and a decline in U.S. office vacancy in the first half of 2014 to 15.6 percent. This performance has been further supported by the slow ramp-up of office construction. By year end, national office vacancy will fall an additional 30 basis points to 15.3 percent, lifting rents 3.7 percent for the year.
The majority of the construction payroll gains was supported by accelerated multifamily development across the country. With nearly 240,000 new units expected in 2014 and another 210,000 forecast for 2015, the apartment sector is in the midst of its strongest building boom in 15 years. Demand, however, remains vigorous as employers have stepped up hiring. National apartment vacancies fell 60 basis points in the first half of the year and appear to have tightened an additional 10 basis points in the third quarter, reaching 4.3 percent — the tightest national rate since 2006.
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