CASSIDY TURLEY RESEARCH
U.S. EMPLOYMENT TRACKER December 2013
Job Growth Solid
BLS Employment Report
A Jolly Good Week For The U.S. Economy
November 2013
The economic data felt pretty good this week. On Monday, we learned that factory production – as measured by the ISM manufacturing index — continued to accelerate in November, a sixth consecutive monthly gain. On Tuesday and Wednesday, newly released figures showed demand for big-ticket items remains very healthy: vehicle sales surged to a seasonally adjusted annualized rate of 16.4 million units – the highest rate in seven years – and new home sales rose 25% in October from September. The good news continued. Thursday we discovered that most of us had underestimated economic growth. Real GDP expanded by 3.6% in the third quarter of 2013, revised upward from the earlier reading of 2.8%. However, the higher figure was due primarily to faster inventory accumulation, which doesn’t bode well for Q4 GDP growth. That said, it is worth pointing out that businesses don’t typically build up their inventories unless they see healthy demand for their products in the pipeline. Finally, all of this surprisingly (mostly) good news was capped off by a November jobs report that further confirms that businesses remain in solid growth mode. So let’s drill down into the employment numbers and discern what the latest trends mean for commercial real estate fundamentals.
203,000
Change in total nonfarm employment
31,000
Office-using
27,000
Manufacturing
22,000
Retail
Job Impact on Q4 Vacancy
The U.S. economy added 203,000 net new total nonfarm jobs in November, according to the Bureau of Labor Statistics (BLS). The figures for September and October were revised upward, adding 8,000 more jobs to the employment base in those two months than originally reported. The 3-month moving average – which helps cut through the monthly data vagaries – reveals that the U.S. economy is creating an average of 192,000 jobs per month, a solid acceleration from the 166,000 averaged over the summer. The unemployment rate, which comes from a different survey than the employment figures, fell from 7.3% to 7.0%. The ADP November employment report, released a day earlier than the official government figures, confirmed a similarly strong trend. The ADP survey showed that private sector employment increased by 215,000 jobs from October to November. Small businesses (with 1-49 employees) led the way, adding 102,000 nonfarm payrolls in November. Large businesses (500+) added 65,000 and medium-sized businesses (50-499) added 48,000 jobs. The impact from implementation of the Affordable Care Act – and the fear that businesses would slow hiring (or increase temp hiring) to avoid paying for health insurance —has not shown up in the data, at least not yet.
Actual Forecast *Corr
Q3
Q4
Office
.80
15.2%
15.1%
Industrial
.78
8.4%
8.2%
Multi-family
.74
4.2%
4.1%
Retail
.84
10.5%
10.4%
*Correlation between jobs & vacancy
Source: Cassidy Turley Research
Overall, the latest employment trends indicate that the commercial real estate fundamentals will continue to tighten. Office-using employment rose by 31,000 in November; the manufacturing sector added 27,000 jobs, the retail sector added 22,000 jobs, and the construction sector added 17,000 jobs. Assuming the statistical relationship between employment and vacancy holds true, the latest job trends suggest that vacancy will decline by 10-20 bps across the major CRE segments from 2013Q3 to 2013Q4.
Office-using Employment Nearly back to pre-recession levels
29500 29000 28500 28000 27500
Office-using, ths, SA
Source: BLS
Oct 2013
May 2012
Oct 2010
Jan 2009
Apr 2007
Jul 2005
Oct 2003
27000
Looking ahead. The improving economic data has rekindled the debate about whether the first QE tapering – that is, when the Fed will start to taper its assets purchase program -- will occur sooner rather than later. Certainly, that is how the equity markets see it – at least as of this writing: the DJIA was down 1.6% for the first week of December. Though the odds are increasing that the Fed may take action sooner, our baseline scenario assumes the central bank will wait until the March 18-19 FOMC meeting before reducing its monthly bond purchases. After all, Fed members will likely want to see a little more clarity with respect to fiscal policy from the Congress and the White House on future federal budgets and the debt ceiling status before they start tinkering with monetary policy. Policy issues aside, many things went right for the commercial real estate recovery in 2013: occupancy grew in all U.S. CRE sectors; there was robust demand for space in industrial and multifamily; property values climbed at a healthy clip in most metros. Yes, plenty of headwinds remain – rising interest rates sit firmly at the top of our list of concerns. But the latest economic data gives us greater confidence that the trend of tightening fundamentals will continue for the foreseeable future. cassidyturley.com | 1
CASSIDY TURLEY RESEARCH
U.S. EMPLOYMENT TRACKER Employment Situation by Metro: Total Nonfarm* (000s)
Office-Using*
% Chg
(000s)
% Chg
Industrial Sector* (000s)
% Chg
Unemployment Oct 2013
Atlanta, GA
66.7
2.8%
24.9
3.8%
5.1
1.2%
7.7%
Austin, TX
23.3
2.8%
9.0
4.6%
1.6
1.5%
5.3%
Baltimore, MD
21.6
1.6%
9.5
3.2%
0.0
0.0%
6.9%
Boston, MA
55.4
2.2%
16.8
2.5%
-0.5
-0.2%
6.5%
Charlotte, NC
23.6
2.8%
7.9
3.3%
4.1
2.7%
8.0%
Chicago, IL
56.6
1.5%
31.8
3.2%
6.9
1.0%
9.1%
Cincinnati, OH
8.0
0.8%
4.2
1.8%
2.7
1.3%
7.2%
Columbus, OH
13.5
1.4%
4.1
1.7%
3.8
2.6%
7.2%
Dallas, TX
72.2
3.4%
39.1
6.2%
0.8
0.2%
6.0%
Dayton, OH
-1.4
-0.4%
0.6
0.8%
-0.9
-1.3%
7.7%
Denver, CO
35.8
2.9%
13.3
3.7%
2.1
1.2%
6.5%
Detroit, MI
-5.3
-0.7%
2.3
1.4%
2.1
1.4%
10.3%
Edison, NJ
12.3
1.2%
1.5
0.6%
1.6
1.0%
7.8%
Fort Lauderdale, FL
20.8
2.8%
3.2
1.6%
2.1
2.3%
5.4%
Houston, TX
84.3
3.1%
16.5
2.8%
16.8
3.2%
6.0%
Indianapolis, IN
13.2
1.4%
1.5
0.7%
-0.7
-0.4%
6.9%
Kansas City, MO
7.8
0.8%
5.0
1.9%
1.0
0.6%
6.3%
Las Vegas, NV
18.8
2.3%
2.3
1.4%
-0.3
-0.4%
9.4%
Los Angeles, CA
55.7
1.4%
22.6
2.3%
-4.7
-0.6%
9.7%
Louisville, KY
14.7
2.4%
2.6
2.1%
2.3
1.6%
8.0% 8.0%
Miami, FL
5.3
0.5%
3.6
1.6%
1.3
0.7%
Milwaukee, WI
4.0
0.5%
-0.5
-0.2%
-1.3
-0.7%
7.1%
Minneapolis, MN
39.5
2.2%
5.5
1.2%
-0.4
-0.1%
4.5%
Nashville, TN
26.7
3.4%
10.2
5.5%
6.5
3.8%
6.7%
New York, NY
81.7
1.5%
6.7
0.4%
2.3
0.6%
8.4% 8.3%
Newark, NJ
13.0
1.3%
1.4
0.5%
3.7
1.3%
Oakland, CA
6.6
0.7%
-2.1
-0.9%
-1.0
-0.6%
7.1%
Philadelphia, PA
18.0
0.9%
5.8
1.2%
-2.3
-0.9%
7.9%
Phoenix, AZ
35.4
2.0%
11.2
2.4%
4.9
1.9%
7.0%
Pittsburgh, PA
18.7
1.6%
9.5
3.6%
0.9
0.4%
6.8%
Portland, OR
19.2
1.9%
5.7
2.5%
4.8
2.2%
6.9%
Raleigh, NC
8.3
1.6%
3.9
2.8%
2.8
3.4%
6.3%
5.2
0.6%
-0.7
-0.4%
1.9
2.7%
8.4%
20.1
1.6%
2.7
0.9%
-1.9
-1.2%
7.1%
Sacramento, CA San Diego, CA San Francisco, CA
22.6
2.2%
10.2
2.9%
1.2
1.3%
5.3%
San Jose, CA
25.1
2.7%
13.2
4.9%
2.4
1.0%
6.7%
Seattle, WA
39.6
2.7%
7.1
1.9%
3.3
1.3%
5.7%
St. Louis, MO
10.9
0.8%
1.4
0.5%
3.3
1.5%
7.1%
Tampa, FL
42.2
3.6%
12.3
3.9%
1.3
0.8%
6.6%
Washington DC Metro
30.0
2.1%
4.0
0.1%
0.1
0.1%
5.8%
West Palm Beach, FL
11.0
2.1%
2.8
2.0%
-0.9
-0.9%
6.7%
*Employment change, Aug - Oct 2012 over Aug - Oct 2013 Source: BLS
U.S. Research Kevin Thorpe, Chief Economist Jennifer Edwards, Project Manager Tel: 202.463.2100
2 | Cassidy Turley
CASSIDY TURLEY RESEARCH
U.S. EMPLOYMENT TRACKER Employment Indicators By Company Size
U.S. Jobs Lost/Gained
U.S. Nonfarm Private Sector Job Growth, 000’s
Recession vs. Recovery, 000’s
Small (1-490
120
Medium (50-499)
Large (500+)
Professional and business services Leisure and hospitality
100
Retail trade
80
Manufacturing Transportation and utilities
60
Construction
40
Financial activities Information
20 0 Sept-13
Oct-13
-2500
Nov-13
-1250
0
Jobs Lost
Source: ADP National Employment Report
1250
2500
Jobs Regained
Source: BLS
Unemployment vs. Office Vacancy
Job Openings Total Nonfarm, (SA Millions)
11.0%
18%
4 3.5
10.0%
17%
9.0%
3 2.5
Confidence Growing to Seek New Employment
2.8 Nov 13
Aug 13
2.7
Quit Rate, Total Nonfarm (SA, %)
Continuing Claims (mil)
Source: Employment and Training Administration
Sep 2009
2.9
Dec 2007
3
Mar 2006
3.1
2.6 2.4 2.2 2 1.8 1.6 1.4 1.2 Jun 2004
3.2
Sep 2002
3.3
Dec 2000
390 380 370 360 350 340 330 320 310 300 290 May 13
Sep 2013
Quit Rate
U.S. Nonfarm Private Sector Job Growth, 000’s
Feb 13
Sep 2013
Source: BLS
Jobless Claims
Nov 12
Aug 2011
Sep 2009
Dec 2007
Mar 2006
Jun 2004
Sep 2002
Job Openings
Office Vacancy Rate
Source: Cassidy Turley Research; BLS
Initial Claims (ths.)
Aug 2011
Unemployment Rate
Q3 13
Q3 12
Q3 11
Q3 10
15% Q3 09
7.0%
2 1.5 Dec 2000
16%
8.0%
Source: BLS
cassidyturley.com | 3
U.S. Research • Kevin Thorpe, Chief Economist • Jennifer Edwards, Manager • Tel: 202.463.2100