HIRING UNDETERRED BY HIGH INTEREST RATES
Labor market moving closer to equilibrium even amid strong hiring. Total employment increased by 272,000 in May, coming in above the average monthly gain year-to-date. Despite this uptick in job creation, there are several signs that overall labor demand is cooling and moving closer in line with labor supply. Nearly half of last month’s hiring was concentrated in just two main employment sectors, which includes roles in government. It is likely that public sector staffing needs will ebb in the months ahead as budget shortfalls are addressed. The unemployment rate also inched up 10 basis points from April to 4.0 percent in May, its highest mark since January 2022. This shift followed an April decline in the number of available positions to 8.06 million open jobs, the lowest level since February 2021. Equating to 1.2 available roles for every job seeker, this is the closest the margin has been since June 2021.
Office, lab space could benefit from high-skilled job growth. In May, the professional, scientific and technical services industry added 32,000 jobs, well above the trailing year’s monthly average of 19,000. Most of these additions were in accounting, tax preparation, bookkeeping and payroll services, in addition to architectural, engineering, and various consulting services, which are traditionally office-using positions. Roles in architecture, engineering and management, as well as in life, physical and social science, are less prone to telework, with 60 percent of staff in office as of the May 2024 survey. Increased hiring in these sectors may indicate companies intend to hold onto, or even grow, their office or lab space in the near future. While net absorption activity will be variable until most pre-2020 leases turn over or are renewed, the metric has improved over the past four quarters ended March.
Rising hospitality staff counts reflect restaurant performance. The leisure and hospitality sector added 42,000 roles in May, including 25,000 positions at food service and drinking places, displaying restaurateurs’ confidence in current consumer demand. While some popular restaurant chains have announced recent store closings, the sector is in a strong position overall. Bars and restaurants recorded greater yearover-year retail consumer spending increases than the retail sector overall in April, and vacancy at such establishments nationally has held at a low 3.7 percent rate for 18 straight months through March.
Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; CME Group; Federal Reserve; Moody’s Analytics; Real Capital Analytics