Marcus & Millichap is reporting that employers' acceleration of hiring in October is a key measure of steady economic growth.
- U.S. employers shook off their third-quarter doldrums in October, hiring the most new workers in any month so far this year. The sizable gain in payrolls also renews discussions about a possible hike by the Federal Reserve in the overnight lending rate before the end of this year. The drop in the unemployment and underemployment rates in October to multi-year lows may convince the central bank that the labor market slack has tightened sufficiently to spur higher wage growth and warrant a move.
- Fueled almost entirely by growth in private-sector industries, employers created 271,000 positions in October, nearly matching the sum of jobs added in the preceding two months combined. Payroll gains spanned several sectors, and the approaching holiday season figured prominently in last month’s hiring spurt. Retailers added nearly 44,000 workers in October, the most in any month this year. Both Target and Amazon recently announced plans to bring on a significant number of seasonal workers, which should be reflected in additional increases in retail staffing in the weeks ahead. Outside of holiday-related activity, the ongoing enrollment of new workers in employer-sponsored health plans contributed to a gain of approximately 57,000 healthcare jobs last month.
- Both the unemployment rate and the underemployment rate dipped to eight-year lows last month, reaching 5.0 percent and 9.8 percent, respectively. The declines will likely figure in the Fed’s upcoming monetary policy discussions. The much-scrutinized labor force participation rate, meanwhile, held at 62.4 percent but has decreased this year. The fall in the rate, however, predates the recession and actually commenced at the turn of the century. While the economic downturn accounted for a portion of the decrease, factors including the aging of the population and greater college enrollment also contributed significantly.
- The U.S. office sector appears poised to break out in the months ahead. Professional and business services employers created 78,000 positions in October and have added workers in nearly every month over the past two years. Gains in office-based businesses including accounting, engineering, architecture and administrative services drove most of the increase and continue to fill unused cubicles and workspaces. This year, U.S. office vacancy will tumble 40 basis points to 14.9 percent on net absorption of 84 million square feet. Minimal construction and growing demand for larger layouts will support an additional decline in the vacancy rate next year.
- October hiring provides additional momentum to the U.S. apartment sector. Through the first three quarters this year, the U.S. vacancy rate slid 60 basis points to 3.9 percent, the lowest quarterly reading in 14 years, as more than a quarter million units were absorbed. Construction volumes remain elevated, but the steady growth in demand will maintain the vacancy rate in the low-4 percent range in the coming quarters and support additional concessions burn and higher rents.