What Those Job Numbers Mean For CRE

On February 3, the Bureau of Labor Statistics released its latest monthly employment data, showing that January job creation came in double the level forecast by economists and Wall Street. A total of 517,000 positions were added, and the unemployment rate fell to a record low of 3.4%. (The US has only exceeded 517,000 job additions once, in May 2010.) And while “some economists are trying to candy-coat the terrible results, saying the job additions were inflated by wonky seasonal adjustments…at the end of the day the number is the number,” says Marcus & Millichap’s John Chang in a new research video.

Some fear that adding so many jobs so quickly could trigger the Fed to push interest rates up more aggressively after announcing a softer touch at their February 1 meeting. But Chang is taking the long view.

“We’re pretty much past the pandemic recovery,” Chang says. “Today there are 2.7 million more jobs than pre-COVID and adding more than 500,000 jobs in a month is significant.” But “if you look back historically from the CRE standpoint job creation is the lifeblood of real estate space demand. when the US adds job, demand for CRE space has historically risen,” he says.

Chang says commercial real estate investors should be cheering the job numbers, noting that strong employment gains will support commercial real estate space demand, drive positive fundamentals and support property revenues and values. Asset classes he’s eyeing with interest include apartment, retail and industrial, all of which benefit from vacancy rates that are low by historical standards.

“In the big picture the rate increases are temporary,” he says. “The financial markets will normalize.”