2018 Job Growth Closes on a High Note, Tight Unemployment to Restrain Hiring

 

EMPLOYMENT

JANUARY 2019

2018 Job Growth Closes on a High Note, Tight Unemployment to Restrain Hiring

Aggressive recruiting accelerates employment growth in 2018, raising housing demand and consumer spending. The economy added 312,000 positions in December for an annual total of 2.6 million new roles, outperforming both 2016 and 2017. Unemployment fell to a half-century low. Employers sustained a higher rate of hiring amid a tighter labor market in part because they filled positions with less-experienced candidates and provided more training to cover the skill gap. A broader range of people finding full-time employment is, in turn, increasing housing demand. Much of that is going toward more affordable multifamily options, supporting a 12 percent rise in apartment absorption in 2018. Some firms are also raising wages to attract the best talent as average hourly earnings appreciated 3.2 percent last year. Greater take-home pay is increasing retail consumption and consumer spending, and sales over the most recent holiday shopping season improved by the largest margin in six years. Travel spending within the U.S. is up as well, contributing to the best year for hotel occupancy on record dating back to 1988.

Favorable outlook for 2019 despite potential headwinds. The new year begins with positive momentum from the jobs market but a low unemployment rate will add mounting pressure to recruiters. Many small businesses continue to report difficulty in finding qualified workers as their most pressing business dilemma. Another challenge is increased inflation risk from rising wages and tariffs that could force the Federal Reserve to tap the brakes on economic growth. Despite these headwinds, job additions will remain in the 2 million range, sustaining commercial real estate demand. Further hiring will underpin positive rental activity, keeping apartment vacancy comfortably below 5 percent. Among retail properties, availability will fall to a near-two-decade low, supported by a moderated construction pipeline.

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Developing Trends

Labor force participation rises at end of year. The unemployment rate ticked up 20 basis points to 3.9 percent in December as more people re-entered the labor force. Many are starting new positions, but others have just begun the job search.

Higher construction wages impacting development. Among the sectors raising pay is the construction industry. The 3.9 percent increase in average hourly earnings helped employers hire 280,000 personnel in 2018, about 30,000 more people than last year. Rising construction costs will weigh on the pace of development and renovation.

Healthcare hiring speeds up as new medical facilities open. Healthcare payrolls grew by 346,000 personnel in 2018, mainly for ambulatory services. There is a growing need for such employees at outpatient facilities and urgent care centers, increasingly important tenants for shopping centers.

312,000

Jobs Added in December 2018

3.9%

Unemployment Rate in December 2018

Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; RealPage, Inc.; STR Inc.

 

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