July 8, 2019

Executive Summary

  • Hiring rebounded in June with 224,000 new jobs created, well up from 72,000 in May.
  • This strong June report modestly weakens the Fed’s case for 2019 rate cuts, but market analysts still predict a high likelihood of a 25-bp cut in July and at least one more cut later in the year.
  • Wage growth stayed in check at 3.1% in June and core inflation remained at or below Fed expectations, including a slowdown in May, giving the Fed room to maneuver.
  • The unemployment rate ticked up by 10 bps to 3.7% with a 10-bp increase in the labor force participation rate to 62.9%.
  • June marked the 105th consecutive month of job growth—the longest stretch in U.S. history—and the unemployment rate remained near a multi-decade low.

Commercial Real Estate Highlights

  • Office: The professional & business services sector added 51,000 jobs in June, up significantly from 24,000 in May.
  • Industrial: Transportation & warehousing continued its strong run in June with 23,900 new jobs and 158,000 in the past 12 months. Manufacturing also rebounded in June with 17,000 new jobs, firmly surpassing its three-month average of 7,700 new jobs per month and showing resilience in the face of trade tensions.
  • Health Care: Growth in the health care sector continued with 34,900 jobs created in June, beating the monthly average of 26,000 jobs over the past three months.
  • Construction: Hiring in the construction sector continued in June with 21,000 jobs created, in line with the three-month average of 20,000 per month.
  • Multifamily: A robust jobs market and continuing wage growth of more than 3% will support demand for multifamily housing.
  • Retail: Food & beverage (F&B) employment cooled slightly in June, shedding 300 jobs. Employment in the broader retail sector remained soft and was down by 5,800 jobs for the month. Three-month averages show an average monthly gain of 8,900 F&B jobs and a loss of 9,300 retail jobs.
  • Hotels: Strong gains in the office-using sectors support increased demand from business travelers. Continuing healthy wage growth and a strong labor market will support leisure demand.

The pace of hiring rebounded in June after a soft May. On average, 2019 has been weaker than 2018 with the average number of jobs created per month down to 172,000 vs. 235,000. Still, the pace of hiring is close to what it was in the first halves of 2016 and 2017 when an average 177,000 and 182,000 new jobs per month were added, respectively.

Non-accelerating wage growth and continued low core inflation will allow the Fed to maintain rate cut flexibility. The strong June headline number does modestly weaken the case for 2019 rate cuts, but the market is strongly expecting a 25-bp cut in July and at least one more rate cut later this year.

Overall, June’s employment report supports CBRE’s view that the U.S. economy remains healthy. Even as average monthly jobs growth cools and risks to the global outlook remain, we expect economic conditions in the U.S. to remain broadly supportive of property market fundamentals during the second half of 2019.

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