IRVINE, CA—With Friday's release of the Bureau of Labor Statistics (BLS) November Employment Situation report, economists saw an increase in average monthly gains, marking a new record high for the recovery.
Chris Muoio, senior associate and economist with Auction.com Research, offered the following analysis:

"The BLS released November employment data today, and it appears Christmas has come early for commercial and residential real estate. November saw a massive 321,000 jobs added, crushing expectations, and marking the strongest monthly gain since January of 2012. The report also included upward revisions to September and October, adding a total of 44,000 jobs to those months. This brings the average monthly gain this year to 240,000, a new high for the recovery.

Unemployment remained stable in November at 5.8%, its lowest for the cycle. Labor force participation remained flat from the month prior as well, measuring 62.8%, on par with its lows for the cycle. However, other measures are pointing to diminishing slack in the labor market. Average hourly earnings saw a 0.4% increase in the month, double of predicted expectations. While this is a good initial burst, wage growth remains muted on an annual basis, measuring 2.1%, and will need several more months to establish a firm trend. Improving wage growth would be an elixir to the housing market, which has seen price appreciation stall as affordability has diminished.

It appears the retail environment may be brightening, despite initial reports of doom and gloom on Black Friday. Sporting goods stores and non-store retailers saw employment gains of more than 3% over the past three months. Food and beverage stores saw solid gains as well, with payrolls rising 1.2% over the past three months, acceleration from its annual growth rate. Food services and drinking places employment also rose. Rising retail employment usually portends improved absorption, though this has yet to materialize for the cycle, as the secular headwind from e-commerce has proven too strong. This can be seen in the employment figures by the strength in “non-store retail” employment growth - absorbers of office space in places like Seattle and New York and a massive source of demand for industrial property.
The construction industry has bifurcated, as residential building construction continues to expand, while civil engineering and non-residential construction are slowing. Residential construction is currently being driven by the robust multifamily supply pipeline that is in place, with permitting at highs for the cycle. Non-residential building construction has seen employment fall 0.7% over the last three months, while civil engineering has seen very modest growth of 0.3%.
The healthcare sector continues to expand at its steady pace, with home health care services, outpatient care services and ambulatory health services among the strongest sub-sectors. Demographics will remain supportive of this industry for years to come, even with increased regulatory burden. Medical office and retail locations will benefit from this demographic trend and may help absorb some of the retail slack being carved out by e-retail.
Temporary help services and employment services remain top-performing sectors as well. Employment in the sectors rose 2.2% and 2.4% respectively over the past three months, and both show annual growth of more than 8%. Unmeasured slack in the labor market and temporary employment are both contributing to constrained wage growth, and this trend has shown no signs of abating. Along with a continuing of the early signs of wage growth, a shift to “higher quality” jobs is the other ingredient to shift the economy into high gear.
The oil and gas sector slowed down in November. Oil and gas extraction saw marked deceleration in the month, the first one that accounted for lower oil prices. Oil and gas extraction employment is still 6% higher than a year ago, but with oil continuing to fall into December, it seems that the fracking boom may be shifting into a lower gear. This is troubling, as Houston faces a large increase in office space, much of which is pre-leased to energy companies. This could result in a slower Texas economy, which has been the star of the recovery to date, with rising office vacancies in several of the Texas metros."

For a copy of the full report, please contact Katherine Lambert (klambert@hoytorg.com).

Instant Insights /

Auction.com: Christmas Came Early for CRE

Related Stories

Recommended For You