Last week’s jobs report confirms what I’ve been saying for quite a while now—the U.S. employment outlook appears extremely weak and will improve only marginally. More economists are now recognizing what they call “structural” changes to the U.S. economy—how we have trouble competing against lower cost competitor countries all over the world and especially in Asia. According to the Wall Street Journal, nearly 40% of workers recently finding new jobs have taken 20% less in compensation than their former jobs. Beggars can’t be choosers, but that’s the plight of more and more Americans.
Tellingly, our dominant major multinational corporations lead the way in off-shoring more of their operations outside the US The profits come back here, the top executives make off like bandits, but rank-and-file workers have less job security and see overall wage/benefit levels stagnate or shrink. Big companies show no signs of picking up the hiring slack despite sitting on trillions of dollars in capital and strong profits—they make more money by hiring fewer US employees, and that means bigger bonuses for their executive teams.
Now the story line goes that these companies would hire more folks, if demand were better. But chilling further any chances of a demand rebound will be the ongoing budget slashing at state and local governments. No one can argue that overly generous public employee benefits need to be modified significantly, but layoffs and program cuts will impact many people and keep upward pressure on the unemployment numbers.
Meanwhile our favored economic stimulus is tax cuts, which force the meat ax approach to government spending, consequently cutting more middle income jobs, while not appreciably helping people out of work or those seeing their incomes diminish. We’ve had a tax cuts on steroids policy for more than a decade now and where are all the jobs? Again, the big gains from tax cuts come for the people at the top of the wage earning pyramid who are the least impacted by the ongoing structural changes.
So what does this all mean for commercial real estate? Well since I’ve been in the business—for close to 30 years now—I’ve always been told that real estate is a lagging economic indicator. We’ll, if we’re a laggard that means we can’t expect much a pick up in demand for space. Yes, there will be some improvement—the unemployment rate ticked down to 9.4% from 9.7%. But not improvement that feels very good. Dealmakers will continue to trade for top properties and more money will gradually come off the sidelines to do more transactions as vacancy numbers get a little better. But forget about rent spikes and occupancy rates that justify a new round of construction. It is four long years now since the housing market began to tilt and then crash, and homebuilders remain in their self-imposed cocoon.
Unfortunately, the anemic jobs trends offer more evidence for the very lackluster period ahead.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
