September 6, 2019

Executive Summary

  • 130,000 new jobs were created in August, below expectations of 150,000.
  • The unemployment rate remained at 3.7% and the labor force participation rate increased by 20 basis points (bps) to 63.2%.
  • Average hourly earnings rose by 0.4% in August and by 3.2% over the past 12 months—a level that should not affect the Fed’s flexibility on monetary policy.
  • Additional Fed rate cuts are expected.
  • August marks 107 consecutive months of job growth—the longest stretch in U.S. history—and the unemployment rate remained near multi-decade lows.

Commercial Real Estate Highlights

  • Office: Hiring in office-using sectors was a bright spot in August. Professional & business services added 37,000 jobs and financial services added 15,000. This brought the three-month averages to 38,700 and 12,700 per month, respectively.
  • Industrial: Hiring in the warehousing & storage sector was essentially flat at just 1,000 new jobs in August, below the three-month average of 1,900. The manufacturing sector gained 3,000 jobs in August, lowering its three-month average to 5,700 new jobs per month. Continued trade tensions remain a risk for industrial markets.
  • Retail: Food & beverage (F&B) employment remained healthy in August, increasing by 11,900 jobs. Employment in the broader retail sector remained soft, losing 11,100 jobs. Three-month averages show an average monthly gain of 7,000 F&B jobs and a loss of 9,400 retail jobs.
  • Construction: The pace of hiring in the construction sector picked up in August with 14,000 jobs created, above the three-month average of 10,300 per month.
  • Health Care: Growth in the health-care sector continued its steady march with 23,900 jobs created in August, sliding below the three-month average of 28,700 jobs per month.
  • Multifamily: Labor market fundamentals support continued demand for rental housing with the unemployment levels near multi-decade lows, increasing workforce participation and solid wage growth.
  • Hotels: Strong gains in the office-using sectors will continue to support demand from business travelers, while healthy wage growth, workforce participation and low unemployment will support leisure travel.

The Bottom Line

Job growth slowed to 130,000 in August, well below the 2019 average of 158,000 new jobs per month. While a slower pace of hiring is expected late in the cycle, some economic indicators, such as historically low Treasury yields and tepid manufacturing activity, are concerning. Labor market conditions and consumer confidence remain strong and continue to propel consumer spending but, as additional tariffs are applied to more consumer goods, sentiment could further erode, and this is a risk to growth.

The August job report supports CBRE’s forecast of slower economic growth, due in part to the U.S./China trade dispute. Current conditions and additional Fed cuts are generally supportive of real estate markets and are expected to remain so for the near future.

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