Limited Job Losses Despite Harsh Weather Encouraging Sign; Positive Territory on Horizon

According to the Marcus & Millichap blog the limited number of jobs lost in February, despite harsh weather, could signal better times ahead:

March 5, 2010

  • With multiple employment sectors recording growth in February, despite anticipated losses due to harsh weather, the economy has begun to generate limited employment traction. Employers cut an unexpectedly low 36,000 jobs during the month, suggesting hiring may turn positive in the second quarter. The professional and business services sector reiterated employers’ need for additional staff by hiring 51,000 workers in February, but, as in previous months, caution reigned, with 47,500 of the added jobs being temporary. Steady increases in temporary employment often foreshadow the creation of full-time jobs as the economy emerges from recession. With five consecutive months of additions through February, temporary employment has signaled the economy is making continued headway in its choppy recovery.
  • Among other sectors, education and health services and leisure and hospitality added an aggregate 39,000 workers last month. Manufacturers created jobs for the second month in a row, adding 1,000 positions to payrolls and marking the first time since 2006 that manufacturing employment has expanded in successive months. These positive contributions to total employment, however, were more than offset by the losses in other sectors, including the elimination of 64,000 construction jobs and 12,000 transportation and warehousing jobs that may largely be attributable to poor weather, particularly in the Northeast.
  • The addition of 342,000 people to the work force last month helped keep the unemployment rate at 9.7 percent. Though this figure could be partially related to a re-benchmarking of data in January, it may also signal increased confidence in the employment market. The household survey indicated that the number of employed rose by 308,000 individuals in February. This information suggests small businesses, which tend not to be captured in the broader BLS nonfarm employment figures, may have resumed hiring on a limited scale.
  • Impact on Commercial Real Estate

  • The unemployment rate among 20- to 34-year-olds, or the prime apartment renter cohort, remained unchanged last month at 11.7 percent but has improved from a recent high of 12.2 percent last fall. Strengthening employment opportunities and job growth should stimulate the apartment sector going forward, especially as younger individuals who delayed forming households during the recession enter the work force. Following an increase of 130 basis points in 2009, national apartment vacancy will decline 30 basis points this year to 7.7 percent as more than 89,000 units get absorbed. Rents will continue to lose traction, however, as effective rents will slip 3 percent.
  • The modest improvement in manufacturing employment and further strengthening in the ISM Manufacturing Index bode well for warehouse and distribution properties in the months ahead. Nationwide industrial vacancy surged 200 basis points last year to 12.6 percent on negative net absorption of 139 million square feet. Space demand will recover slightly this year, although vacancy will rise 20 basis points.

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