Economy Watch: How the Real Estate Industry is Benefitting from Job Increases
- Mar 06, 2015
The Fed can report a better economy, consumer optimism and sentiment can be up, leading and lagging indicators can be better—none of it means much without job growth. Finally, it looks like the U.S. economy is on the path of sustained job growth: according to the Bureau of Labor Statistics on Friday, payroll employment increased by 295,000 in February, and the unemployment rate edged down to 5.5 percent. It’s the latest in a run of solid gains. For the real estate industry, there have been job gains in industries that indicate higher demand for certain kind of space: in professional and business services (office), food services and drinking places (restaurants), health care (medical office) and in transportation and warehousing (industrial). Employment in construction is up considerably as well.
The employment picture is especially strong recently in professional and business services. The increase in February was 51,000, and all together the number has risen by 660,000 over the last 12 months. Last month, employment continued to trend up in management and technical consulting services (up 7,000), computer systems design and related services (up 5,000), and architectural and engineering services (up 5,000). These tend to be well-paying jobs, and their growth is inspiring growth in office and multifamily markets in some places, including the likes of greater San Francisco, Seattle, Boston, Austin and other tech hubs.
The upsurge in jobs also shows that however much the oil patch states and cities might stand to suffer because of low prices of energy—Houston, say, or Tulsa or the Dakotas—the rest of the economy is benefiting. It also shows that this year’s winter storms didn’t put much a dint in hiring. There was a bit of downward revision to the totals employment numbers of previous months, but it wasn’t much, and on the whole recent job creation is still strong: over the past three months, job gains have averaged 288,000 per month, a rate than hasn’t been since the 1990s.
Unfortunately, the missing piece of the puzzle for full economic health is still wages. In February, the BLS reported, average hourly earnings for all employees on private payrolls rose by 3 cents to $24.78. Over last 12 months, average hourly earnings have risen by a not-too-stellar 2 percent. That’s ahead of inflation, but not by much. Considering recent gains in productivity and corporate profits, the anemic gains in pay are an unhealthy mismatch, and will remain a drag on the economy as long as they persist. It will also keep people gloomy about their own circumstances, which will keep consumer spending from being all it can be. Longer-term, the mismatch also has the potential to make the nation’s political life even more fractious than it already is, a circumstance that’s not good for economy growth or real estate demand.