By Ken McCarthy, Senior Managing Director, Research/Leasing Management
Last week’s employment report showed a slowdown in job growth in the third quarter. But the economy is not as sluggish as the headline numbers suggest. In addition, the sectors that most influence commercial real estate continue to perform well.
Here are some highlights from my latest Weekly Economic Update:
- Although job growth disappointed for the second consecutive month, the impact on commercial real estate is likely to be minor. Office-using employment growth remains healthy as does consumer spending, and those are the main drivers of demand for commercial real estate.
- The economy appears to have slowed in the third quarter, generating the fewest jobs since the second quarter of 2012.
- In addition, wage growth remains sluggish. Average hourly earnings fell from $25.10 to $25.09 for the month and were up 2.2% from a year ago. The long awaited acceleration of wage growth still has not arrived.
- The slowdown means it is likely the Federal Reserve will not raise interest rates this month, and the much anticipated lift off of interest rates will take place in December at the earliest.
- On the plus side, office-using employment increased by 43,000 jobs marking the 21st consecutive month of gains in the main driver of office demand.
The economic factors impacting commercial real estate remain positive. Not only is office-using employment rising at a strong pace, but consumer spending remains healthy. The latest evidence involves September motor vehicle sales, which topped an annual rate of 18 million units for the first time since 2005. When consumers are spending, demand for retail space increases and there is greater movement of goods around the nation boosting demand for industrial properties. We expect these trends to continue in the fourth quarter.
Overall, the past couple of months were mixed for the economy. Job growth was sluggish, and manufacturing activity slowed. But consumers continue to spend, and demand for commercial real estate remains healthy. The economy is not hitting on all cylinders, but it continues to expand at a solid pace.
How do these statistics translate in your life? Is your company hiring or laying people off?
Be sure to read my full Weekly Economic Update for the complete perspective.
Ken has been with Cushman & Wakefield since August 2006. He is responsible for preparing Cushman & Wakefield’s US and global economic analysis, as well as working with the New York City research organization to track and analyze activities in the New York City, Westchester County, Fairfield County, Long Island and New Jersey areas.
Be sure to follow Ken’s latest economic updates @KenMcCarthyecon