CRE Gets Boost as Economy Adds 379,000 Jobs in February

The US economy showed its clearest sign yet of recovery with February’s unemployment report released this morning by the Bureau of Labor Statistics: Some 379,000 jobs were added to US payrolls last month, led by the leisure and hospitality sectors.

To be sure, the jobs market is nowhere near its pre-pandemic health. First-time unemployment claims totaled 745,000 last week, up from 736,000 the week before, while both the unemployment rate, at 6.2%, and the number of unemployed persons, at 10 million, changed little in February. Although both measures are much lower than their April 2020 highs, they remain well above their pre-pandemic levels in February 2020 (3.5% and 5.7 million, respectively).

All that said, the gains in February were very telling, particularly for the commercial real estate industry. There were 355,000 jobs added in the leisure and hospitality sector; in the bar and restaurant sub-sector alone 286,000 positions were added. This is a strong signal of the service sector reopening, according to Fannie Mae’s Chief Economist Doug Duncan.

The new positions at bars and restaurants is in part a reflection of relaxed restrictions on dining that took effect last month, particularly in California and New York, according to Marcus & Millichap Research Services, but they also signal the beginning of a more robust stage of employment growth after a pause in the recovery late last year. “The positive momentum, aided by ongoing stimulus measures, speaks to the underlying demand and resurging confidence in the retail and hospitality sectors that were most impacted by the pandemic,” it said.

At first glance, the industry most likely to benefit from these new jobs is the multifamily sector, particularly the workforce and Class B sectors. It is here that service sector job losses have had an impact, albeit not a large enough one to seriously affect performance.

It should also not go unnoticed that increased employment in the lodging and retail sectors point to a growing recovery in these hard-hit sectors.

Employment rose in accommodation (+36,000) and in amusements, gambling, and recreation (+33,000). Retail trade added 41,000 jobs in February. The largest gains occurring in general merchandise stores (+14,000), health and personal care stores (+12,000), and food and beverage stores (+10,000). These gains were partially offset by a loss in clothing and clothing accessories stores (-20,000). Following steep job losses in March and April of 2020 (-2.4 million jobs over the 2 months combined), retail trade has added 2 million jobs from May through February.

The picture is more muted for the office sector: within professional and business services, temporary help services added 53,000 jobs in February but is down by 175,000 from a year ago.

Employment in health care and social assistance increased by 46,000 in February. Health care employment was little changed over the month (+20,000), following a large decline in the prior month (-85,000). In February, job gains in ambulatory health care services (+29,000) were partially offset by losses in nursing care facilities (-12,000). Employment in social assistance rose by 26,000, mostly in individual and family services (+18,000). Employment in health care and social assistance is down by 909,000 over the year.

Sectors that saw declines included local government education (-37,000) and state government education (-32,000). The BLS notes that pandemic-related employment declines in 2020 distorted the normal seasonal buildup and layoff patterns in the education sector, making it more challenging to discern the current employment trends in these industries.

Also employment in construction fell by 61,000 in February, largely reflecting declines in nonresidential specialty trade contractors (-37,000) and heavy and civil engineering construction (-21,000). Severe winter weather across much of the country may have held down employment in construction, BLS says, noting that employment in the industry is 308,000 below its level a year earlier.