Payroll Growth Drives Property Performance; Some Uncertainty as Investors Await Tax Plan


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Research Brief
March 2017
Developing Trends
Last month, employers created 235,000 jobs. Goods-producing sectors made a notable contribution to the total, adding 95,000 positions. Construction firms added workers, but natural resources and mining establishments also expanded payrolls for the fourth consecutive month as activity in the energy sector increased.
Retailers shed 26,000 workers from payrolls in February, reflecting some store closures and an ongoing shift of resources to online distribution. Retail property owners have opportunities to replace underperforming chains with fresh concepts, a factor behind a projected decline in U.S. retail vacancy this year to 5.1 percent.
Additional workers entered the labor force last month and secured jobs, leading to a drop in the unemployment rate to 4.7 percent. The unemployment rate for workers ages 20 to 34 also dipped to 5.8 percent, a positive for the potential release of pent-up household creation and apartment property performance.
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Payroll Growth Drives Property Performance;
Some Uncertainty as Investors Await Tax Plan
Healthy job creation in February illustrates a labor market riding considerable momentum. Job growth is bolstering commercial property performance improvements at a time when some uncertainty hangs over commercial property sales. Commercial real estate’s role as an inflation hedge will invigorate the transaction market as clarity on tax and economic policy emerges. A reduction in the unemployment rate last month supported a gain in the average hourly wage. Including the February increase, the average hourly wage is up 2.8 percent year over year, narrowly outpacing the rate of inflation. Growing wages will prompt the Federal Reserve to raise its lending benchmark next week, an expectation already priced into a rise in the yield on the 10-year U.S. Treasury.
235,000 Monthly Job Gain February 2017 2.8% Wage Growth Through February 2017 Y-O-Y
* Through February
Sources: Marcus & Millichap Research Services; BLS
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