November 1, 2019

Executive Summary

  • 128,000 jobs were created in October, beating expectations of 75,000.
  • Revisions to August and September employment reports showed an additional 95,000 jobs were created, raising the three-month average to 176,000 per month.
  • The unemployment rate rose slightly to 3.6% as the labor force participation rate increased to 63.3%.
  • Average hourly earnings were up by 3.0% over the past 12 months—a level that has largely held steady throughout 2019.
  • October’s jobs report supports a pause in interest rate cuts by the Fed, with market expectations of a December cut falling sharply.
  • October marks 109 consecutive months of job growth—the longest stretch in U.S. history—and the unemployment rate remained near a 50-year low.

Commercial Real Estate Highlights

  • Office: Hiring in office-using sectors was resilient in October. Professional & business services added 22,000 jobs and financial services added 16,000, bringing their respective three-month averages to 32,300 and 13,700 per month.
  • Industrial: Hiring in warehousing & storage jobs stalled in October, adding just 500 jobs—less than half of the three-month average of 1,100 per month. The manufacturing sector lost 36,000 jobs in October, largely due to the General Motors auto strike, bringing the three-month average to a loss of 13,000 jobs per month. Tariffs will continue to weigh on the manufacturing sector and, by extension, industrial markets.
  • Retail: October’s employment report was good for retail demand across the board. Food services & drinking places added 47,500 jobs for the month. The broader retail sector added 6,100 jobs in October. Three-month averages show an average monthly gain of 38,300 food services & drinking places jobs and 3,800 retail jobs.
  • Construction: The construction sector added 10,000 jobs in October, just above the three-month average of 9,300 per month.
  • Health Care: Growth in the health-care sector slowed with 14,600 jobs created in October, well below the three-month average of 29,000 per month.
  • Multifamily: Healthy job growth and wage gains along with historically low unemployment will continue to support household formation and overall demand in the multifamily market.
  • Hotels: Steady gains in office-using sectors bode well for demand from business travelers. Nevertheless, heightened uncertainty may begin to weigh on such travel as businesses become more vigilant about expenses. Leisure travel will remain supported by a strong labor market, boosting consumerism.

The Bottom Line

The 128,000 jobs created in October easily beat expectations, which had been lowered due to the now-resolved General Motors auto strike. This resilience supports a pause in additional short-term interest rate cuts, with markets now expecting that the Fed will not cut rates in December. Should conditions change, wage growth at 3% will allow the Fed to adjust its policy as necessary.

CBRE expects economic growth will continue, thanks in large part to a strong labor market and lower interest rates. There are risks to the outlook associated with trade tensions and slowing global growth. This is particularly apparent in manufacturing activity, which the Institute for Supply Management reports fell for the third consecutive month in October. With such factors in mind, we expect slower growth in 2020, which likely will spur additional interest rate cuts. Even with slower economic growth, property market fundamentals should remain strong.

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