Executive Summary

  • The U.S. added 266,000 jobs in April versus expectations of 1 million. Leisure & hospitality led all sectors with 331,000 jobs added.
  • The yield on the 10-year Treasury initially fell sharply but regained the lost ground by late afternoon.
  • The unemployment rate edged up by 10 bps to 6.1% and the labor participation rate increased by 20 bps 61.7%.
  • CBRE continues to expect the U.S. economic recovery will accelerate in Q2 2021, supporting a recovery of property market fundamentals.

Commercial Real Estate Highlights

  • Office: Office-using jobs decreased by 60,000 in April. Professional & business services lost 79,000, while financial activities gained 19,000. Most of the losses were concentrated in administrative & support services (-127,600). Professional & technical services saw a healthy gain of 42,600. CBRE still expects that office demand will slowly increase as more workplaces reopen.
  • Industrial: The warehousing & storage sector lost 4,300 jobs in April, while manufacturing lost 18,000. Nevertheless, the manufacturing sector remains strong as gauged by the Purchasing Managers’ Index. An improving economy and rising consumer sentiment bode well for growth of industrial & logistics property markets.
  • Retail: Traditional retail lost 15,300 jobs in April, while food services & drinking places gained 187,000. An improving public health environment, high levels of savings and a recovering labor market will continue to fuel demand for retail services. This will benefit physical retail as the recovery continues.
  • Construction: The construction sector’s job total was unchanged in April. While the sector continues to benefit from low interest rates, it is facing challenges from supply-chain disruptions, shortages of materials like lumber and higher labor costs. CBRE believes that some of these supply chain issues will begin to lessen in the second half of the year.
  • Health Care: Health care lost 4,100 jobs in April. Ambulatory health care (outpatient services) gained 21,200, while hospitals lost 5,800 and nursing & residential care lost 19,500. Nevertheless, demographic and technological trends will support demand for health care and broader life sciences facilities.
  • Hotels: Accommodation services gained 54,400 jobs in April. CBRE expects an uneven recovery for the hotel industry that will extend to 2024, with pockets of strength in markets that cater to domestic leisure travelers. This outlook is brightening amid improving consumer confidence and loosening restrictions.
  • Multifamily: An improving labor market will support household formation. Urban multifamily will benefit as large cities loosen restrictions and offices reopen. In addition to cyclical factors, demographic trends and single-family housing affordability issues will also continue to support demand.

The Bottom Line

The U.S. added 266,000 jobs in April—far fewer than the 1 million expected. Given the strength of the economy, there likely are several reasons why expectations were so off. The speed of recovery has made it difficult for employers to source talent and keep up with demand. A skills gap is emerging, in which available labor doesn’t necessarily have the skills for a particular position. Generous unemployment benefits and direct stimulus payments to Americans may also be reducing the near-term incentives to work. Lastly, there remains a fear of catching or spreading COVID-19, along with lagging school reopenings and difficulties in finding affordable child care.

CBRE continues to expect accelerated economic growth in Q2 2021. We expect that the U.S will add 5.5 million jobs in 2021, lowering the unemployment rate to around 4.5%. This will aid the recovery of property markets, although certain sectors like office, retail and hotels will lag more than others. While April’s job report was disappointing, it does not materially change CBRE’s view on the economy.

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