U.S.

EMPLOYMENT TRACKER
December 2013

CASSIDY TURLEY RESEARCH

BLS Employment Report

November 2013

Job Growth Solid

A Jolly Good Week For The U.S. Economy
The economic data felt pretty good this week. On Monday, we learned that factory production as measured by the ISM manufacturing index continued to accelerate in November, a sixth consecutive monthly gain. On Tuesday and Wednesday, newly released gures showed demand for big-ticket items remains very healthy: vehicle sales surged to a seasonally adjusted annualized rate of 16.4 million units the highest rate in seven years and new home sales rose 25% in October from September. The good news continued. Thursday we discovered that most of us had underestimated economic growth. Real GDP expanded by 3.6% in the third quarter of 2013, revised upward from the earlier reading of 2.8%. However, the higher gure was due primarily to faster inventory accumulation, which doesnt bode well for Q4 GDP growth. That said, it is worth pointing out that businesses dont typically build up their inventories unless they see healthy demand for their products in the pipeline. Finally, all of this surprisingly (mostly) good news was capped off by a November jobs report that further conrms that businesses remain in solid growth mode. So lets drill down into the employment numbers and discern what the latest trends mean for commercial real estate fundamentals. The U.S. economy added 203,000 net new total nonfarm jobs in November, according to the Bureau of Labor Statistics (BLS). The gures for September and October were revised upward, adding 8,000 more jobs to the employment base in those two months than originally reported. The 3-month moving average which helps cut through the monthly data vagaries reveals that the U.S. economy is creating an average of 192,000 jobs per month, a solid acceleration from the 166,000 averaged over the summer. The unemployment rate, which comes from a different survey than the employment gures, fell from 7.3% to 7.0%. The ADP November employment report, released a day earlier than the ofcial government gures, conrmed a similarly strong trend. The ADP survey showed that private sector employment increased by 215,000 jobs from October to November. Small businesses (with 1-49 employees) led the way, adding 102,000 nonfarm payrolls in November. Large businesses (500+) added 65,000 and medium-sized businesses (50-499) added 48,000 jobs. The impact from implementation of the Affordable Care Act and the fear that businesses would slow hiring (or increase temp hiring) to avoid paying for health insurance has not shown up in the data, at least not yet. Overall, the latest employment trends indicate that the commercial real estate fundamentals will continue to tighten. Ofce-using employment rose by 31,000 in November; the manufacturing sector added 27,000 jobs, the retail sector added 22,000 jobs, and the construction sector added 17,000 jobs. Assuming the statistical relationship between employment and vacancy holds true, the latest job trends suggest that vacancy will decline by 10-20 bps across the major CRE segments from 2013Q3 to 2013Q4. Looking ahead. The improving economic data has rekindled the debate about whether the rst QE tapering that is, when the Fed will start to taper its assets purchase program -- will occur sooner rather than later. Certainly, that is how the equity markets see it at least as of this writing: the DJIA was down 1.6% for the rst week of December. Though the odds are increasing that the Fed may take action sooner, our baseline scenario assumes the central bank will wait until the March 18-19 FOMC meeting before reducing its monthly bond purchases. After all, Fed members will likely want to see a little more clarity with respect to scal policy from the Congress and the White House on future federal budgets and the debt ceiling status before they start tinkering with monetary policy. Policy issues aside, many things went right for the commercial real estate recovery in 2013: occupancy grew in all U.S. CRE sectors; there was robust demand for space in industrial and multifamily; property values climbed at a healthy clip in most metros. Yes, plenty of headwinds remain rising interest rates sit rmly at the top of our list of concerns. But the latest economic data gives us greater condence that the trend of tightening fundamentals will continue for the foreseeable future.
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203,000

Change in total nonfarm employment

31,000 27,000 22,000

Ofce-using Manufacturing Retail

Job Impact on Q4 Vacancy

Actual Forecast *Corr Ofce Industrial Multi-family Retail
.80 .78 .74 .84

Q3
15.2% 8.4% 4.2% 10.5%

Q4
15.1% 8.2% 4.1% 10.4%

*Correlation between jobs & vacancy

Source: Cassidy Turley Research

Ofce-using Employment
Nearly back to pre-recession levels

29500 29000 28500 28000 27500 27000 Oct 2003 Jan 2009 Oct 2010 May 2012 Oct 2013 Apr 2007 Jul 2005

Office-using, ths, SA

Source: BLS

U.S. EMPLOYMENT TRACKER

Employment Situation by Metro:
Total Nonfarm* (000s)
Atlanta, GA Austin, TX Baltimore, MD Boston, MA Charlotte, NC Chicago, IL Cincinnati, OH Columbus, OH Dallas, TX Dayton, OH Denver, CO Detroit, MI Edison, NJ Fort Lauderdale, FL Houston, TX Indianapolis, IN Kansas City, MO Las Vegas, NV Los Angeles, CA Louisville, KY Miami, FL Milwaukee, WI Minneapolis, MN Nashville, TN New York, NY Newark, NJ Oakland, CA Philadelphia, PA Phoenix, AZ Pittsburgh, PA Portland, OR Raleigh, NC Sacramento, CA San Diego, CA San Francisco, CA San Jose, CA Seattle, WA St. Louis, MO Tampa, FL Washington DC Metro West Palm Beach, FL 66.7 23.3 21.6 55.4 23.6 56.6 8.0 13.5 72.2 -1.4 35.8 -5.3 12.3 20.8 84.3 13.2 7.8 18.8 55.7 14.7 5.3 4.0 39.5 26.7 81.7 13.0 6.6 18.0 35.4 18.7 19.2 8.3 5.2 20.1 22.6 25.1 39.6 10.9 42.2 30.0 11.0

CASSIDY TURLEY RESEARCH

Ofce-Using* (000s)
24.9 9.0 9.5 16.8 7.9 31.8 4.2 4.1 39.1 0.6 13.3 2.3 1.5 3.2 16.5 1.5 5.0 2.3 22.6 2.6 3.6 -0.5 5.5 10.2 6.7 1.4 -2.1 5.8 11.2 9.5 5.7 3.9 -0.7 2.7 10.2 13.2 7.1 1.4 12.3 4.0 2.8

Industrial Sector* (000s)

5.1 1.6 0.0 -0.5 4.1 6.9 2.7 3.8 0.8 -0.9 2.1 2.1 1.6 2.1 16.8 -0.7 1.0 -0.3 -4.7 2.3 1.3 -1.3 -0.4 6.5 2.3 3.7 -1.0 -2.3 4.9 0.9 4.8 2.8 1.9 -1.9 1.2 2.4 3.3 3.3 1.3 0.1 -0.9

Unemployment Oct 2013

7.7% 5.3% 6.9% 6.5% 8.0% 9.1% 7.2% 7.2% 6.0% 7.7% 6.5% 10.3% 7.8% 5.4% 6.0% 6.9% 6.3% 9.4% 9.7% 8.0% 8.0% 7.1% 4.5% 6.7% 8.4% 8.3% 7.1% 7.9% 7.0% 6.8% 6.9% 6.3% 8.4% 7.1% 5.3% 6.7% 5.7% 7.1% 6.6% 5.8% 6.7%

% Chg
2.8% 2.8% 1.6% 2.2% 2.8% 1.5% 0.8% 1.4% 3.4% -0.4% 2.9% -0.7% 1.2% 2.8% 3.1% 1.4% 0.8% 2.3% 1.4% 2.4% 0.5% 0.5% 2.2% 3.4% 1.5% 1.3% 0.7% 0.9% 2.0% 1.6% 1.9% 1.6% 0.6% 1.6% 2.2% 2.7% 2.7% 0.8% 3.6% 2.1% 2.1%

% Chg
3.8% 4.6% 3.2% 2.5% 3.3% 3.2% 1.8% 1.7% 6.2% 0.8% 3.7% 1.4% 0.6% 1.6% 2.8% 0.7% 1.9% 1.4% 2.3% 2.1% 1.6% -0.2% 1.2% 5.5% 0.4% 0.5% -0.9% 1.2% 2.4% 3.6% 2.5% 2.8% -0.4% 0.9% 2.9% 4.9% 1.9% 0.5% 3.9% 0.1% 2.0%

% Chg
1.2% 1.5% 0.0% -0.2% 2.7% 1.0% 1.3% 2.6% 0.2% -1.3% 1.2% 1.4% 1.0% 2.3% 3.2% -0.4% 0.6% -0.4% -0.6% 1.6% 0.7% -0.7% -0.1% 3.8% 0.6% 1.3% -0.6% -0.9% 1.9% 0.4% 2.2% 3.4% 2.7% -1.2% 1.3% 1.0% 1.3% 1.5% 0.8% 0.1% -0.9%

*Employment change, Aug - Oct 2012 over Aug - Oct 2013

Source: BLS

U.S. Research
Kevin Thorpe, Chief Economist Jennifer Edwards, Project Manager Tel: 202.463.2100

2 | Cassidy Turley

U.S. EMPLOYMENT TRACKER

Employment Indicators
By Company Size
U.S. Nonfarm Private Sector Job Growth, 000s

CASSIDY TURLEY RESEARCH

U.S. Jobs Lost/Gained

Recession vs. Recovery, 000s
Professional and business services Leisure and hospitality Retail trade Manufacturing Transportation and utilities Construction

120 100 80 60 40 20 0

Small (1-490

Medium (50-499)

Large (500+)

Financial activities Information

Sept-13

Oct-13

Nov-13

-2500

-1250 Jobs Lost

1250 Jobs Regained

2500

Source: ADP National Employment Report

Source: BLS

Unemployment vs. Ofce Vacancy

Job Openings
Total Nonfarm, (SA Millions)

11.0% 10.0% 9.0% 8.0% 7.0%

Q3 09 Q3 10 Q3 11 Q3 12 Q3 13

18% 17% 16% 15%

4 3.5 3 2.5 2 1.5

Dec 2000 Sep 2002 Dec 2007 Mar 2006 Sep 2009 Aug 2011 Sep 2013
Sep 2013

Jun 2004

Unemployment Rate
Source: Cassidy Turley Research; BLS

Office Vacancy Rate

Source: BLS

Job Openings

Jobless Claims
U.S. Nonfarm Private Sector Job Growth, 000s

Quit Rate
Condence Growing to Seek New Employment

Dec 2000

Sep 2002

Dec 2007

Mar 2006

Sep 2009

2.7
May 13 Aug 13 Nov 12 Nov 13 Feb 13

Initial Claims (ths.)

Continuing Claims (mil)

Source: BLS

Quit Rate, Total Nonfarm (SA, %)

Source: Employment and Training Administration

cassidyturley.com | 3

U.S. Research Kevin Thorpe, Chief Economist Jennifer Edwards, Manager Tel: 202.463.2100

Aug 2011

Jun 2004

390 380 370 360 350 340 330 320 310 300 290

3.3 3.2 3.1 3 2.9 2.8

2.6 2.4 2.2 2 1.8 1.6 1.4 1.2