2 minute read time
August 6, 2021

Executive Summary

  • The U.S. added 943,000 jobs in July, beating expectations of 845,000. Leisure & hospitality again led all sectors with 380,000 jobs added.
  • The unemployment rate fell by 50 basis points (bps) to 5.4% and the labor participation rate increased by 10 bps to 61.7%.
  • Average hourly earnings increased by 0.4% in July, up by 4% from a year ago, signaling ongoing inflationary pressure on wages.
  • Strong job growth in July, along with upward revisions totaling 119,000 jobs for May and June, likely will spur the Fed to consider tapering its asset purchase program.
  • The 10-year Treasury yield rose to nearly 1.3% by midday as investors reacted to the strong jobs report.
  • CBRE expects economic growth to moderate from this point on. Job gains and a return to normal mobility will drive a real estate recovery over the next 24 months. The recent surge in COVID-19 infections due to the delta variant is a near-term headwind, but the impact is expected to be less severe than in 2020.

Commercial Real Estate Highlights

  • Office: Office-using jobs increased by 82,000 in July. Professional & business services gained 60,000 and financial activities added 22,000. CBRE expects office demand to improve, although the delta variant is weighing on plans to return to the office and could delay the sector’s recovery for several months.
  • Industrial: The warehousing & storage sector gained 10,700 jobs in July and manufacturing added 27,000. The sector will continue to be supported by strong overall job growth, fueling consumer spending and demand for industrial & logistics space.
  • Retail: Traditional retail lost 5,500 jobs in July, while food services & drinking places gained 253,200. Though the delta variant carries some risk for retail, strong economic fundamentals and wide availability of vaccines should allow the sector to continue recovering.
  • Construction: The construction sector gained 11,000 jobs in July. While construction remains hampered by supply-chain disruptions, this headwind should abate later this year. Historically low interest rates bode well for construction’s outlook.
  • Health Care: Health care gained 36,800 jobs in July. Ambulatory health care (outpatient services) gained 31,900, while hospitals gained 18,300 and nursing & residential care lost 13,400. CBRE expects that demographic trends and new technologies will fuel increased demand for health care properties over the long term.
  • Hotels: Accommodation services gained 73,700 jobs in July. CBRE expects an uneven recovery for the hotel industry over the next 36 months, with domestic leisure travel destinations recovering first and business travel destinations rebounding more gradually. The delta variant is a risk, particularly for business travel, but currently is not expected to materially change the outlook.
  • Multifamily: Continued strong economic growth supports household formation and ability to pay rent. The outlook for the urban multifamily market is improving as people move back to large cities and offices reopen. Demographic trends and single-family housing affordability issues will also continue to support multifamily demand.

The Bottom Line

The U.S. added 943,000 jobs in July, surpassing expectations of 845,000. While the COVID-19 delta variant is a risk to future growth, the wide availability of effective vaccines and therapeutics means that the recovery will not be threatened. With 5.7 million more people still unemployed than before the pandemic, monetary policy will remain accommodative despite short-term inflationary pressures.

CBRE expects slightly slower economic growth for the rest of 2021. This, along with a prolonged rise in COVID infections from the delta variant, may slow but not derail commercial real estate’s recovery. Overall, however, the July jobs report is very positive for the commercial real estate market.

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