Economy Watch: Middling Employment Numbers Might Keep Interest Rates Low Longer

The March employment numbers surprised on the downside, but oddly enough that could be a positive for the commercial real estate industry for a while.

The March employment numbers surprised on the downside, but oddly enough that could be a positive for the commercial real estate industry for a while, at least if future employment numbers aren’t any worse—or much better. That’s because the mediocre March report might cause the Federal Reserve to re-think any notions of raising interest rates for a while longer, perhaps through the rest of the year. After all, one thing the central bank is clear about is that it takes current economic conditions into account when making interest-rate decisions. So developers and investors might have a little more time to put together deals at historically low interest rates, which has been an important ingredient in deals for some time now.

Still, one month a trend does not make, and job growth might continue to be robust. On the whole, the employment numbers are still positive, and even the oil-dependent states aren’t seeing much of a negative impact of oil prices just yet, except maybe for Louisiana. Ahead of the March employment report, the BLS reported on state unemployment, noting that unemployment rates decreased from February 2013 to February 2014 in 47 states and D.C. That’s slightly less positive than in January, when all the states saw employment improve year-over-year (which almost never happens). Louisiana’s unemployment rate went from 5.4 percent last year to 6.7 percent this year, while North Dakota edged up from a minuscule 2.7 percent to a still minuscule 2.9 percent. South Carolina, not known as an oil economy, nevertheless saw its unemployment go from 6.1 percent to 6.6 percent year-over-year.  In any case, none of those states include major commercial real estate markets: employment is still growing in all those markets.

The March jobs numbers also offered mixed news about the business sectors that tend to use commercial space. For example, employment in professional and business services trended up in March by 40,000 positions. Not a bad showing for a single month, but growth in this sector, which uses office space, averaged 34,000 jobs per month in the first quarter of 2015, below the average monthly gain of 59,000 in 2014. Employment in warehousing and manufacturing, which reflect patterns in industrial space usage, didn’t change much in March.

Employment in retail trade continued to trend up in March, gaining 26,000, which is roughly in line with the previous 12-month average gain. Within retail trade, general merchandise stores—the Walmarts and Targets of the world—added 11,000 jobs for the month. Also of note in the retail world: Walmart and McDonald’s, both behemoth employers, recently announced plans to raise wages for some employees from extremely low to very low, which is a small but real amount of progress on the problem of anemic wage growth. The companies cited the heating up of the job market as a reason for the move, though they might also have in mind heading off such local initiatives as Seattle’s raising of its minimum wage (an ordinance that became effective last week, though the increase to $15 an hour takes place over three to seven years, depending on the size of the employer).

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