Job growth returns to more familiar, positive territory. Employers added 187,000 new positions in July, the second-slowest month for employment growth since December 2020, when staff counts retracted. July’s hiring was nevertheless still 61,000 roles ahead of the monthly average going back to 1980. The drawback in job creation was not unexpected, as the 9.6 million open positions in June was the lowest in two years. Together, these statistics reflect a downshift in the demand for personnel; although, the labor market is still tight in a broad sense. This slowdown to a more typical level of job creation is far from a concern, however, posing positive implications for both the economy at large and commercial real estate in particular.

Softening labor demand may help flatten interest rates. Wage growth for the year ended in July held at 4.4 percent, well below the March 2022 high of 5.9 percent. This easing bodes well for inflation, where rising pay is a contributor. June’s headline CPI inflation rate of 3.0 percent is already down two-thirds from its peak last year. This trend may grant the Federal Reserve confidence to hold the overnight lending rate flat at the lower bound of 5.25 percent through the rest of this year, the current scenario favored on Wall Street. After 11 rate hikes in 16 months, an extended period of consistency would do much to buttress financial markets, including investment sales of commercial real estate.

Multiple tailwinds emerging for commercial real estate trading. Higher lending rates, and the rapid pace at which those costs climbed, have been a substantial impediment to commercial property transactions over the past year or so. An end to the current hiking cycle, while not lowering the baseline interest rate, may grant lenders enough stability to pull in their spreads slightly, tempering financing costs for borrowers. Lower and consistent financing rates may be enough for more trades to move forward. Another tailwind for sales may come from consumer attitudes. The indices for both consumer confidence and sentiment, reflecting attitudes about today’s economy and where it is going in the near future, have been climbing in recent months. This may be a favorable bellwether for spending and household formation. Both trends would support demand for commercial space, particularly retail and multifamily; in turn, bolstering the confidence of investors who may be on the fence due to uncertain economic prospects.

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* As of June Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CME Group; Department of Homeland Security; Federal Reserve; Moody’s Analytics; RealPage, Inc.