May 3, 2019

Executive Summary

  • The pace of hiring accelerated in April with 263,000 new jobs created vs. expectations of 190,000.
  • The unemployment rate decreased by 20 bps to 3.6%—the lowest level since 1969. The labor force participation rate also decreased by 20 bps to 62.8%.
  • Average hourly earnings growth remained at 3.2% over the past 12 months in April. Steady wage growth allows the Fed to continue its largely neutral rate outlook.
  • Productivity rose by an extremely strong 3.6% in the first quarter, the strongest since 2010 and giving further momentum to extension of the cycle.
  • The April employment report marks 103 consecutive months of job growth, the longest stretch in U.S. history.

Commercial Real Estate Highlights

  • Retail: Strong job growth in experiential retail continued in April, with 25,000 new food & beverage (F&B) jobs created. Employment in the retail sector (excluding F&B) decreased by 12,000 jobs. Three-month averages were similar, with an average monthly gain of 17,100 F&B jobs vs. a loss of 13,800 retail jobs.
  • Office: Hiring in the professional & business services and financial activities sectors was very strong in April with 88,000 jobs created, bringing the three-month average to 61,300.
  • Health Care: Healthy growth in the sector continued with 27,000 jobs created in April, bringing the monthly average for the past three months to 35,900.
  • Construction: Hiring in the construction sector continued to strengthen with an increase of 33,000 jobs, which is well above the three-month average of 10,000.
  • Industrial: Warehousing & storage jobs increased by 5,400 in April for a monthly average of 3,700 over the past three months. Manufacturing stabilized with 4,000 jobs created, in line with the three-month average of 4,000 new jobs per month.
  • Multifamily: Strong job growth, along with solid wage gains, will continue to underpin healthy multifamily market dynamics.
  • Hotels: Demand is expected to remain strong. Sizeable gains in the professional & business services and the financial services sectors bode well for business travel. Additionally, solid wage growth and very strong hiring will support leisure demand.

April’s employment report showed continued strength of the U.S. economy. Importantly, hiring was robust and accompanied by solid but non-accelerating wage growth. This will continue to give the Fed breathing room when formulating policy. It is also worth noting that productivity gains—important to maintain wage growth while keeping inflation in check—were considerably strong for the first quarter of 2019, which, if continued, would be a very positive indicator for the U.S. economy.

Overall, CBRE maintains its view that the U.S. economy remains on track for continued growth, with an even better outlook for the second half of the year. This growth will broadly continue to support real estate market fundamentals and investment activity across property types.

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