Executive Summary

  • The U.S. economy added 850,000 jobs in June, exceeding expectations of 706,000.
  • Job growth was led by consumer services sectors: Arts & entertainment and accommodation & food services accounted for 40% of new hires in June.
  • Wages grew by 0.3% for the month and 3.6% year-over-year. While this is robust growth, it is not high enough to heighten investor concerns about inflation levels.
  • The unemployment rate unexpectedly increased by 10 basis points from May to 5.9% even though the labor participation rate was unchanged at 61.6%.
  • CBRE expects total job growth of 3.8% for the year (5.5 million jobs).

Commercial Real Estate Highlights

  • Office: Most office-using sectors are now on a par with pre-pandemic employment levels. Office-using jobs increased by 71,000 in June. Professional & business services gained 72,000, while financial activities lost 1,000.
  • Industrial: The warehousing & storage sector gained 13,600 jobs in June, pushing its aggregate employment to 8% above pre-pandemic levels. The pace of growth in this sector will slow as consumers shift more spending to brick-and-mortar stores. The manufacturing sector added 15,000 jobs in June.
  • Retail: Food services & drinking places added 194,300 jobs in June, while traditional retail gained 67,100. This reflects a strong rebound in consumer demand for restaurants and bars as many social distancing restrictions have been lifted nationwide.
  • Construction: Despite very strong housing fundamentals, the construction sector lost 7,000 jobs in June as building supply shortages delayed many projects. CBRE expects construction hiring to increase in H2 2021 as these building supply shortages ease.
  • Health Care: The health care sector lost 12,200 jobs in June. Ambulatory health care (outpatient services) gained 2,900, while hospitals lost 5,000 and nursing & residential care facilities lost 9,600. As effects of the pandemic wane, CBRE expects that demographic trends and new technologies will fuel increased demand for health care properties.
  • Hotels: Similar to retail, hotels are benefitting from a return to normalcy and occupancy rates are rebounding. Accommodation services gained 75,100 jobs in June. Further monthly gains are expected as leisure travel accelerates this summer.
  • Multifamily: Strong job growth will cushion multifamily landlords and tenants from the reduction in unemployment benefits and the end of eviction moratoriums. As major cities relax social distancing guidelines, demand is picking up in urban multifamily submarkets that were hardest hit by the pandemic.

The Bottom Line

Job growth is accelerating as states fully reopen their economies. However, many employers, especially in the leisure & hospitality sector, continue to struggle to meet their labor needs. As a result, hourly leisure & hospitality wages have increased by more than 11% over the past 12 months. This situation will ease over the next 12 months.

The June employment report shows hiring is accelerating from a mediocre spring. CBRE expects that hiring will escalate in H2 2021 and total hiring for the year will hit 5.5 million net new jobs. This is a favorable backdrop for real estate leasing and capital markets. However, we will be hearing more and more about the Federal Reserve beginning to wind down its quantitative easing program (government and mortgage bond purchases).

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