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Page 16 — Office Properties Quarterly — March 2017
Job growth in January blew
past expectations, with some
analysts attributing the
increase to “animal spirits” – a
term coined by John Maynard
Keynes to describe the willingness
of households and businesses to
spend and invest.
Employers added 227,000 net new
payroll jobs in January, well above
the 2016 average of 187,000 and
beating Bloomberg’s survey of econ-
omists, which forecasted 180,000.
Revisions to November and Decem-
ber data subtracted 39,000 jobs.
Sectors that added jobs last
month included retail trade, adding
45,900; professional and business
services, adding 39,000; construc-
tion, adding 36,000; finance, add-
ing 32,000; and restaurants, adding
29,900. The surge in retail hiring,
which seems at odds with post-
holiday layoffs in department and
clothing stores, may be related to
seasonal adjustment factors. Health
care added 18,300 jobs, trailing its
six-month average. Manufacturing
as well as the mining and logging
sector added 5,000 and 4,000 jobs,
respectively; manufacturers contin-
ued to struggle with exports, while
employment in the mining and
logging sector is stirring thanks to
firming oil prices. The only two big
sectors to shed jobs were govern-
ment, losing 10,000 jobs, with most
of the loss in education; and trans-
portation and warehousing, losing
4,000.
Wages increased by 0.1 percent
last month and by 2.5 percent over
the past 12 months, below recent
trends.
The unemploy-
ment rate ticked
up a notch to 4.8
percent, pushed
higher by a surge
in the labor force
of 584,000. This,
in turn, pushed
up the labor force
participation rate
by 0.2 percentage
points to 62.9 per-
cent. The U-6 rate,
which includes
labor market slack
not picked up in
the unemployment
rate, increased from 9.2 percent to
9.4 percent.
There were three key takeaways
from the January employment
report.
First, the labor market may
already be reacting to the business-
friendly policies proposed by the
Trump administration – corporate
tax cuts, infrastructure spending
and regulatory relief – even though
these policies are still in the for-
mative stages and may not kick in
until late this year or 2018. Small
businesses, in particular, may be
encouraged by the prospect of less
red tape.
Second, wages grew last month
but at a slower pace than in previ-
ous months, suggesting that stron-
ger inflation is not necessarily right
around the corner. This provides
some cover for the Federal Reserve
to push interest rates higher at a
measured pace.
And third, analysts disagree about
how much faster employment can
grow given that unemployment is
low and the labor market is near
full employment. Nevertheless,
there is room for “animal spirits”
to have some impact on hiring and
spending, which will support leas-
ing activity in commercial proper-
ties and postpone the onset of the
next recession.
Supply and Demand
Which comes first, demand or
supply? Economic supply-siders
contend that a healthy business
sector is the foundation for a
healthy economy, making it easier
for businesses to offer goods and
services at low prices, and demand
for their products will follow. Yet as
important as businesses are in any
capitalist economy, business capital
spending accounted for 12.4 percent
of the gross domestic product last
year, whereas consumer spend-
ing accounted for 68.7 percent,
based on data from the Bureau of
Economic Analysis. Therefore, a
robust consumer sector will create
Bob Bach
Director of
research-Americas,
Newmark Grubb
Knight Frank,
Chicago
Market Drivers