A Tight Labor Market’s Affect on CRE - Sachse Construction
Topics: Economy & Employment, Headlines

A Tight Labor Market’s Affect on CRE

This morning the US Labor Department will announce the employment figures for May. If recent history is any guide the numbers should be healthy. If very recent history is any guide, there is a possibility that the number of jobs filled last month dropped below expectations.

A few days ago ADP and Moody’s Analytics reported that private payrolls increased by a mere 27,000 jobs last month, vastly underperforming the estimated 173,000 that had been forecast.

This is not to ignore the Labor Department’s numbers, which for the last few months have been robust. In April, for instance, the US economy added 263,000 jobs to nonfarm payrolls and the unemployment rate dropped to 3.6%, reaching its lowest point since December 1969.

In March the US economy added 196,000 jobs. And in February the economy added only 20,000 jobs.

“Job growth is moderating,” says Mark Zandi, chief economist at Moody’s Analytics, in prepared remarks with the release of the ADP/Moody’s Analytics numbers. “Labor shortages are impeding job growth, particularly at small companies, and layoffs at brick-and-mortar retailers are hurting.”

The years-long tight market has also hurt commercial real estate asset classes, with higher vacancy rents, lower asking rates and greater concessions, according to a report last year from JLL.

It calculated the effect that perfect employment would have on CRE and the discrepancy can be jarring. See our slideshow above for details on what life would look like when all open positions are filled.

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