PACE OF HIRING TAPERED IN 2023, WITH IMPLICATIONS FOR CRE
December job additions fall short of the monthly average. Employers closed out the year by adding 216,000 positions in the final month, while the unemployment rate remained unchanged at 3.7 percent. Although this was up from the prior two months, it sustains the trend of slowing addition, with December falling below the 2023 monthly average. This presents a sign that while hiring is still strong despite the pressure of high interest rates on company finances, the labor market has begun to cool. Job creation was most prominent in the government, health care, social assistance and construction sectors, while transportation and warehousing noted a decline, illuminating softening labor demand in more cyclical sectors. Government and in-recovery sectors accounted for roughly 151,000 positions.
Labor shortages reveal hiring difficulties in key sectors. There are over 1 million job openings in the leisure and hospitality and health care sectors, according to recent data. The leisure and hospitality sector is still notably 1 percent short of its pre-COVID high, while U.S. total employment has expanded 3 percent. Operators are challenged to keep sufficient staff levels, hiring only 40,000 personnel last month, less than half the average gain of 88,000 jobs per month in 2022. This shortfall appears most prominently in accommodation and food services, which may limit the feasibility of full hotel occupancy and restaurants’ growth aspirations in 2024. Still, the high demand for this labor cohort shows that operators are not downsizing. The health care sector exhibits a similar complication for medical offices as job openings crest 1.7 million — illustrating a demand for labor and willingness of medical practices to expand — but only a modest 38,000 jobs were added in December.
Employment growth is muted in traditionally office-using sectors. Jobs additions in the professional, business and financial services were limited in December, reflecting a larger trend throughout 2023. Only 110,000 positions were added in this sector through the entirety of last year, a notable decrease from the 1 million-plus new roles added in both 2021 and 2022. The professional, scientific and technical subset was the only sector to record meaningful job growth of 25,000 roles. Meanwhile, employment in temporary help services continued to trend downward. This sector can be viewed as an early warning sign of a cooling labor market as companies generally cut temp positions first when signs of an economic slowdown occur.
Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Moody’s Analytics; RealPage, Inc