Intelligent Investment
Economic Watch: Boeing Strike, Hurricanes Drive Weak October Job Growth
November 1, 2024 3 Minute Read
Executive Summary
- The U.S. added just 12,000 jobs in October, well below expectations of 100,000. Job gains in August and September were revised down by a total of 112,000.
- Health care and government posted the most job gains in October.
- The unemployment rate remained unchanged at 4.1%, while the labor force participation rate fell by 10 basis points (bps) to 62.6%. Average hourly earnings rose by 4.0% year-over-year.
- Today’s employment report reinforces the likelihood of the Fed cutting interest rates by just 25 bps next week. We expect that continued Treasury yield volatility won’t be enough to derail the nascent recovery in investment activity.
Impacts on Commercial Real Estate
Office
Professional & business services lost 47,000 jobs in October, while financial activities had no change. Although office-using job growth has been inconsistent over the past three months, continued growth in the economy and less uncertainty around work patterns should support future leasing activity.
Industrial
The warehousing & storage sector lost 7,000 jobs in October and manufacturing lost 46,000, largely due to the Boeing strike. Nevertheless, we expect that strong consumer spending and e-commerce growth will keep demand for industrial & logistics space relatively resilient.
Retail
Traditional retail lost 6,400 jobs in October, while food services & drinking places gained 3,700. Continued economic growth, coupled with little new supply, should keep retail real estate fundamentals relatively strong.
Construction
The construction sector added 8,000 jobs in October, far fewer than the 20,000 average over the past 12 months. Though traditionally very interest rate sensitive, construction activity has been supported by federal programs, spurring large-scale projects to address a housing shortage.
Health Care
Health care gained 52,300 jobs in October, led by ambulatory services (35,600) and hospitals (7,900). We expect that health-care property demand will be fueled by increasing demand for medical services from an aging population.
Hotels
Accommodation services gained 2,700 jobs in October. We expect that hotel demand will moderate as consumers reduce their spending on experiences due to less savings.
Multifamily
Multifamily demand is expected to remain strong as high mortgage costs put home-buying out of reach for many. Continued job growth also supports household formation, which will aid absorption of new rental supply.
The Bottom Line
While the Boeing strike and two major hurricanes were drivers of weak job growth in October, the unemployment rate was unchanged. Although only 12,000 jobs were gained, continued low unemployment and healthy wage growth reflect a generally resilient labor market.
We expect the Fed to cut interest rates by 25 bps next week and likely again in December, resulting in a full-percentage-point decline for the year.
We expect continued improvement in real estate investment volume and property values. This is underpinned by the Fed’s continued short-term rate cuts and long-term bond yields that, while volatile, remain at levels that support investment activity. The economic environment also will buoy leasing activity. Although economic slowdowns in Europe and China remain risks, we continue to expect a resilient U.S. economy that will support the real estate sector.
