Job Gains Point to Higher Demand for Most Property Types
- Jan 12, 2015
In the Bureau of Labor Statistics monthly jobs reports, the devil’s always in the details. Overall, December turned in a strong report, with an addition of a net of 252,000 jobs nationwide, but it’s also a good report for various commercial real estate sectors. For instance, employment in the professional and business services sector rose by 52,000 in December, potentially meaning that an increase in demand for office space is brewing (though the relationship between adding jobs and adding space isn’t as automatic as it used to be). In any case, employment increased in administrative and waste services (up 35,000), computer systems design and related services (up 9,000) and architectural and engineering services (up 5,000). Not every subsector did well, however—employment in accounting and bookkeeping services was down 14,000, offsetting an increase of the same amount in November.
By contrast, retailers didn’t add any new employees in December (after the figures are adjusted for the usual surge in holiday-oriented workers), though they added a large number in November. And there have been the usual January retail contractions lately; just last week JC Penney said it was closing 40 stores in 2015, on top of more than 30 last year, and Sears Holdings is planning closures of Sears and Kmart stores. Employment at food services and drinking places has been doing better: the increase was 44,000, compared with an average of 30,000 each month in 2014.
The construction industry hired more people in December–48,000–than in recent months, pointing to a possible strong year ahead for the industry as demand for construction projects goes up (construction spending has been going up as well, though it ticked down a bit in December). Specialty trade contractors added 26,000 jobs in December, with the gain about equally split between residential and nonresidential contractors. Employment also increased in heavy and civil engineering construction (up 12,000) and in nonresidential building (up 10,000).
Finally, the BLS said that health care added 34,000 jobs in December, with gains in ambulatory healthcare services at 16,000, nursing and residential care facilities at 11,000, and hospitals at 7,000. Employment growth in health care averaged 26,000 per month in 2014 and 17,000 per month in 2013. Despite changes and uncertainties in the law and reimbursement and other parts of the healthcare industry, the wave of elderly Americans is coming, meaning more employment and more healthcare space taken over the long term (until the last Baby Boomer is just a memory). The employment numbers illustrate the trend in healthcare space: it isn’t large facilities, but neighborhood clinics that benefit most from the growth. It’s a hopeful sign for owners of small retail properties that can accommodate clinics.
Wall Street reacted to the positive jobs numbers on Friday with a negative turn in the markets. The Dow Jones Industrial Average lost 170.5 points, or 0.95 percent, while the S&P 500 dropped 0.84 percent and the Nasdaq fell 0.68 percent. The Dow Jones U.S. Select REIT Index managed to edge up 0.09 percent on Friday. On the whole, REITs have had a good run in the last year—compared with the same a year ago, the index has gained 30.94 percent.