February 28, 2019

Executive Summary:

  • On the heels of a weak February jobs report, the 196,000 new jobs created in March exceeded market expectations of approximately 175,000 and provided strong evidence that the U.S. economy remains in good health.
  • The unemployment rate held steady at 3.8% and the labor force participation rate fell slightly to 63.0%.
  • Average hourly earnings were up by 3.2% over the past 12 months but there is little evidence that wages are accelerating at a rate that would lead to broader inflation and cause a more aggressive interest rate policy by the Fed.
  • The March employment report marks 102 consecutive months of job growth, the longest stretch in U.S. history.

Commercial Real Estate Highlights:

  • Retail: Continued strength of the food & beverage sector (experience retail) boosted overall retail job growth to 15,600 in March (27,300 new F&B jobs vs. a loss of 11,700 retail jobs).
  • Office: Professional & business services and the financial activities sectors added a combined 48,000 jobs in March, bringing the monthly average for 2019 to 39,700.
  • Health Care: Growth in this sector remained very healthy with 49,100 jobs created in March, lifting the monthly average for the year to 40,100.
  • Construction: The construction sector rebounded in March with an increase of 16,000 jobs, which is in line with the three-month average of 15,700.
  • Industrial: Warehousing & storage jobs increased by 1,700 in March for a monthly average of 5,500 over the past three months. Manufacturing lost 6,000 jobs, bringing the monthly average to 4,000 new jobs so far this year. Over the past 12 months, manufacturing has added an average of 17,400 new jobs per month.
  • Multifamily: Continued job growth—showing economic momentum—along with wage gains will support demand and, by extension, broader market fundamentals for multifamily.
  • Hotels: Wage gains and healthy employment gains support a positive outlook for business and leisure demand for the sector. This was evidenced by 33,000 new leisure and hospitality jobs created in March, bringing the three-month average to 42,000 per month.

The March employment data does not change our view of a relatively weak Q1 but positive U.S. growth for all of 2019. Healthy but non-accelerating wage gains, along with low inflation levels, will continue to give the Fed the ability to hold off on continued rate hikes while the global economy goes through a soft patch. This will support market fundamentals and investment activity across property types. We do believe the Fed will likely readopt a mild bias toward tighter monetary policy by the end of the year.

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