3 minute read time
March 6, 2020

Executive Summary

  • 273,000 jobs were created in February, far surpassing expectations of 175,000.
  • Strong employment growth occurred despite the late-January emergence of coronavirus in the U.S., which accelerated by late February and caused dramatic stock market volatility.
  • December and January employment reports were revised upward by a combined 85,000 jobs, putting the three-month average at a very strong 243,000 per month.
  • The unemployment rate fell a tenth of a point to 3.5%, while the labor force participation rate remained at 63.4%.
  • Average hourly earnings grew by 3.0% over the past 12 months.
  • February marked 113 consecutive months of job growth—the longest stretch in U.S. history—and the unemployment rate returned to a 50-year low.

Commercial Real Estate Highlights

  • Office: Hiring in office-using sectors was strong. Professional & business services added 41,000 jobs and financial services employment increased by 26,000, bringing their respective three-month averages to 29,300 and 15,300 per month.
  • Industrial: Warehousing & storage jobs increased by 5,300 in February, bringing the three-month average to 3,900 per month. The manufacturing sector gained 15,000 jobs, decreasing its three-month average loss to 2,300 jobs per month.
  • Retail: February’s employment report showed a mixed picture in retail. Food services & drinking places added 52,600 jobs for the month, while the broader retail sector lost 7,000 jobs. Average monthly gains over the past three months were 34,500 for food & beverage and 9,500 for retail.
  • Construction: The construction sector added 42,000 jobs in February, well above the three-month average of 35,700 per month. The sector may be impacted going forward due to both changing economic dynamics and difficulty getting building materials from Asia.
  • Health Care: Growth in the health-care sector remained strong with 31,600 jobs created in February, beating the three-month average of 27,900 per month.
  • Multifamily: A strong labor market will support continued household formation over the short term. Over the longer term, home-ownership affordability challenges will continue propelling stronger rental demand.
  • Hotels: The sector will be negatively impacted over the near term by less leisure and business travel until fear over the coronavirus outbreak abates.

The Bottom Line

February’s jobs report showed the U.S. labor market was in an extremely strong position heading into a period of heightened uncertainty over the coronavirus outbreak. Strong gains were widespread across sectors, with office-using jobs rising the most.

Although economic growth will be impacted by the current drop in confidence, a historically tight labor market will make companies hesitant to reduce payrolls. If the coronavirus outbreak eases before the end of Q2, only a small non-recessionary impact on the labor market is likely.

Property markets are well-positioned heading into this period of uncertainty, but there will be some impact to the hotel and retail sectors. Even after its half-point emergency reduction in interest rates on March 3, the Fed has significant further capacity (i.e., further rate cuts or balance sheet expansion) to act forcefully in response to downside risks.

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