‘Blowout’ Jobs Report Hailed by Real Estate Economists


‘Blowout’ Jobs Report Hailed by Real Estate Economists

May 10, 2010 9:28 AM, By Matt Valley, NREI editor-in-chief

Lost in a tumultuous week in which the Dow Jones Industrial Average plunged 5.7% and rioting erupted in Greece over federal budget cuts and tax hikes in that debt-ridden nation was a monthly U.S. jobs report that easily beat expectations.

The U.S. Bureau of Labor Statistics reported Friday that nonfarm payroll employment rose by 290,000 in April, much higher than the consensus estimate of 175,000. Substantial employment gains occurred in manufacturing (44,000), professional and business services (80,000), health care (20,000), and leisure and hospitality (45,000).

Since December, nonfarm payroll employment has expanded by 573,000, with 483,000 jobs created in the private sector. The vast majority of job growth occurred during the last two months.

“The drama playing out in Europe eclipsed this blowout report from the Bureau of Labor Statistics that employers added 290,000 net new payroll jobs last month, including 231,000 in the private sector,” says Bob Bach, chief economist for Santa Ana, Calif.-based Grubb & Ellis. “ It was the best performance since February 2006.”

High drama across the pond

On any other day, this positive jobs report would likely have fueled a big stock market rally, but instead the Dow fell 140 points on Friday due largely to concerns over whether the debt crisis in Greece would spread to other European nations. (The European Union this past weekend agreed to a $955 billion bailout plan in an effort to prevent the sovereign debt crisis in Greece from spreading.)

For the troubled commercial real estate market, Friday’s jobs report was just what the doctor ordered. “The 290,000 jobs added to payrolls last month is good news for commercial real estate because it shows that occupier demand for space is heading in the right direction,” emphasizes Bach.

Although the financial markets remain fragile as the problems in Greece and the euro zone illustrate, Bach believes that those problems don’t necessarily prevent the economic recovery from continuing.

“It’s not unusual for financial markets to disconnect from economic fundamentals for periods of time,” explains Bach. “Consider the 23 percent plunge in the Dow on October 19, 1987 (Black Monday). The economy continued to expand, and employers continued to add jobs at a rapid pace for another 2 ½ years, by which time the stock market had recovered its losses.”

But the financial crisis in Greece is a cautionary tale, according to Bach. The International Monetary Fund estimates that Greece’s debt load will grow from 133% of gross domestic product (GDP) this year to 149% in 2013. The GDP of Greece was estimated at $339.2 billion in 2009.

In contrast, the United States has a national debt of approximately $8.2 trillion, or about 57% of its annual GDP of $14.45 trillion. “Eventually the U.S. must get its own fiscal house in order,” says Bach. He urges investors not to abandon their “analytical rigor” as they compete for bargains in commercial real estate and other assets.

Corroborating green shoots

Victor Calanog, director of research for New York-based Reis, says that the April jobs report reflects what he’s seeing occur in the trenches. For example, monthly effective rents across the U.S. apartment industry rose 0.3% in the first quarter of this year, the first increase since the third quarter of 2008.

If the private sector continues to add jobs at the current pace, there will be less of a drop-off in employment growth once the temporary, part-time jobs for the 2010 Census are eliminated in the latter part of the year, according to Calanog.

“Overall, as the manufacturing sector recovers this should benefit industrial properties first,” says Calanog. “My hope is that the service sector surprises us with more job gains than expected over the next few months because that is what will really spur activity in office and retail leasing.”

Report’s revisions speak volumes

The most encouraging aspect to April’s employment report was the upward revisions to the total number of jobs created in February and March, points out Hessam Nadji, managing director of research services for Marcus & Millichap Real Estate Investment Services based in Encino, Calif.

The change in total nonfarm payroll employment for February was revised from a loss of 14,000 jobs to a gain of 39,000, and the change for March was revised from a gain of 162,000 to 230,000.

“We saw more strength in apartment absorption during the first quarter than expected, and we suspected that it could be a sign that employment is improving faster than the initial numbers suggested,” says Nadji. “And that turned out to be correct.”

Indeed, some 20,424 apartment units were absorbed in the first quarter of 2010, according to Reis, the strongest level of absorption in any first-quarter period over the last 10 years.

Another encouraging sign on the employment front is that the share of industries adding jobs expanded from 48% in March to 64% in April, an undisputable sign that growth is broadening, says Nadji.

“The strength in manufacturing indicates that the recovery in exports and the rebound in domestic demand — particularly in the auto sector — are on track,” Nadji adds. “In general this report reiterates our forecast for job growth of about 1% this year, which is still well below previous first-year recovery periods.”

Nadji expects that office and industrial vacancies will keep rising until the third quarter of this year and then stabilize, but not recede until 2011.

What is Nadji’s outlook for the U.S. shopping center industry? “Retail will continue to lag due to the pressures on local and smaller retailers, oversupply, and an unlikely sustenance of the pace of retail sales recovery.”

‘Blowout’ Jobs Report Hailed by Real Estate Economists


Employment Situation Summary (US)


Ohio State Report is scheduled to be released later today 4-16 and the county map breakdown released 4-20. We will update both reports upon release.


Nonfarm payroll employment increased by 162,000 in March, and the unemployment
rate held at 9.7 percent, the U.S. Bureau of Labor Statistics reported today.
Temporary help services and health care continued to add jobs over the month.
Employment in federal government also rose, reflecting the hiring of temporary
workers for Census 2010. Employment continued to decline in financial activi-
ties and in information.

Household Survey Data

In March, the number of unemployed persons was little changed at 15.0 million,
and the unemployment rate remained at 9.7 percent. (See table A-1.)

Among the major worker groups, the unemployment rates for adult men (10.0 per-
cent), adult women (8.0 percent), teenagers (26.1 percent), whites (8.8 per-
cent), blacks (16.5 percent), and Hispanics (12.6 percent) showed little or no
change in March. The jobless rate for Asians was 7.5 percent, not seasonally
adjusted. (See tables A-1, A-2, and A-3.)

The number of long-term unemployed (those jobless for 27 weeks and over) in-
creased by 414,000 over the month to 6.5 million. In March, 44.1 percent of
unemployed persons were jobless for 27 weeks or more. (See table A-12.)

The civilian labor force participation rate (64.9 percent) and the employment-
population ratio (58.6 percent) continued to edge up in March. (See table A-1.)

The number of persons working part time for economic reasons (sometimes re-
ferred to as involuntary part-time workers) increased to 9.1 million in March.
These individuals were working part time because their hours had been cut back
or because they were unable to find a full-time job. (See table A-8.)

About 2.3 million persons were marginally attached to the labor force in March,
compared with 2.1 million a year earlier. (The data are not seasonally adjusted.)
These individuals were not in the labor force, wanted and were available for
work, and had looked for a job sometime in the prior 12 months. They were not
counted as unemployed because they had not searched for work in the 4 weeks pre-
ceding the survey. (See table A-16.)

Among the marginally attached, there were 1.0 million discouraged workers in
March, up by 309,000 from a year earlier. (The data are not seasonally adjusted.)
Discouraged workers are persons not currently looking for work because they be-
lieve no jobs are available for them. The remaining 1.3 million persons margin-
ally attached to the labor force had not searched for work in the 4 weeks pre-
ceding the survey for reasons such as school attendance or family responsibili-
ties. (See table A-16.)

Establishment Survey Data

In March, nonfarm payroll employment rose by 162,000. Job growth continued in tem-
porary help services and in health care. Federal government employment increased
due to the hiring of temporary workers for Census 2010. Job losses continued in
financial activities and in information. (See table B-1.)

Temporary help services added 40,000 jobs in March. Since September 2009, tempor-
ary help services employment has risen by 313,000.

Employment in health care continued to increase in March (27,000), with the larg-
est gains occurring in ambulatory health care services (16,000) and in nursing and
residential care facilities (9,000).

In March, employment in mining increased by 8,000. Monthly job gains in mining
have averaged 6,000 over the past 5 months.

Employment in federal government was up over the month, reflecting the hiring of
48,000 temporary workers for the decennial census.

Manufacturing employment continued to trend up in March (17,000); the industry has
added 45,000 jobs in the first 3 months of 2010. Over the month, job gains were
concentrated in fabricated metal products (9,000) and in machinery (6,000).

Employment in construction held steady (15,000) in March. The industry had lost an
average of 72,000 jobs per month in the prior 12 months.

Over the month, employment changed little in transportation and warehousing,
leisure and hospitality, retail trade, and wholesale trade.

In March, financial activities shed 21,000 jobs, with the largest losses occur-
ring in insurance carriers and related activities (-9,000). Employment in the
information industry decreased by 12,000.

The average workweek for all employees on private nonfarm payrolls was up by
0.1 hour to 34.0 hours in March. The manufacturing workweek for all employees
increased by 0.2 hour to 39.9 hours, and factory overtime was up by 0.1 hour
over the month. In March, the average workweek for production and nonsuper-
visory employees on private nonfarm payrolls increased by 0.2 hour to 33.3
hours. (See tables B-2 and B-7.)

In March, average hourly earnings of all employees on private nonfarm payrolls
fell by 2 cents, or 0.1 percent, to $22.47, following a 4-cent gain in February.
Over the past 12 months, average hourly earnings have risen by 1.8 percent. In
March, average hourly earnings of private production and nonsupervisory employ-
ees fell by 2 cents, or 0.1 percent, to $18.90. (See tables B-3 and B-8.)

The change in total nonfarm payroll employment for January was revised from
-26,000 to +14,000, and the change for February was revised from -36,000 to

The Employment Situation for April is scheduled to be released on Friday,
May 7, 2010, at 8:30 a.m. (EDT).


For more data visit here: Employment Situation Summary

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