Digging into the Labor Outlook and What it Means for CRE

Headlines announcing the Bureau of Labor Statistics’ employment numbers tend to forget one thing: Those numbers are preliminary, only.

For example, April and May saw a large hiring surge, which came to a crashing halt in June, with preliminary numbers showing the addition of 57,000 jobs. Meanwhile, the much-vaunted April and May figures were revised downward by a combined 74,000 jobs.

Breaking this down, the average monthly job gains over the past six months stood at 92,000.

“Recent reporting volatility, along with large downward benchmark revisions in prior years, suggests first-cut payroll estimates should be treated with caution,” a recently released Marcus & Millichap brief said.

At the same time, unevenness in the labor market could have an impact on selective leasing activity, “with tenants prioritizing renewals, efficient layouts and incremental expansions,” the brief said.

Other highlights include the following:

Softer hiring and a thinner labor pool could increase the role of productivity in sustaining output. This could mean office demand is more focused on renewals and higher-quality space.

Hiring trends were weakest among industries relying on discretionary spending. This includes Leisure & Hospitality and Retail. The brief said this could favor necessity-based retail leasing, while large-ticket items could face slower growth.

Stronger pay gains for those who switch jobs might support in-migration, household formation and apartment demand, especially near employment centers.