U.S.

EMPLOYMENT TRACKER
April 2012

Job Growth Slows in March

U.S. Employment
Change in Non-Farm Payrolls, 000s

Kevin J. Thorpe, Chief Economist

The latest job numbers, while disappointing, are far from terrible. According to the Bureau of
300 250 200
157K 223K 275K 240K

Labor Statistics, employers added 120,000 non-farm payroll jobs in March of 2012 well below the consensus forecast of 205,000 newly created jobs. However, the job creation gures for both January and February were revised upwards by a total of 55,000. From December to March,
120K

150 100 50 0

employers have added 858,000 jobs. That is the best 4-month period of job creation since March of 2006, excluding the temporary federal hiring to conduct the Census in 2010. Unseasonably
Nov '11 Dec Jan Feb Mar

warm weather contributed to the higher January and February gures. Thus, when March gures are included in the mix, we see that the US economy has created an average of 211,000 per month thus far in 2012, which is still solid. If this pace continues, 2.5 million net new jobs will be created in 2012. Nevertheless, the latest gures are a bit of setback for the commercial real estate recovery. Remember that the single most important factor in determining the direction of the property

Source: BLS; Cassidy Turley

Trending the right way

11.0% 18%

markets is employment. All the key metrics - net absorption, vacancy, rents, cap rates, spreads are statistically linked to uctuations in jobs. In reality, even the strong employment reports prior to March had little impact in generating demand for ofce space. Based on the recent job growth trends, the US should have absorbed nearly 20 million square feet (msf) of ofce space in the rst quarter of 2012; instead, absorption totaled just 7.8 msf. One reason is that over 50% of the so called ofce-using jobs created in January and February were temporary jobs. While temp jobs are a precursor for stronger payroll hiring down the road, they do not move the needle instantaneously for the ofce sector. It is also worth noting that law rms -- historically a major driver of ofce space demand in most metro central business districts (CBDs) have on the whole not been part of the current jobs recovery. Indeed, the legal services sector shed 1,300 jobs in March, and there has been virtually no growth in that sector for the last 15 months. On the ipside, the job growth in the manufacturing sector has been clear and consistent. In March, the manufacturing sector added 37,000 net new jobs consistent with the pace of hiring it has experienced since December. Manufacturing has not seen this level of growth since the late 1980s. The eventual

10.0%

17%

9.0%

16%

8.0%
2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1

15%

Unemployment

Office Vacancy

Source: BLS; Cassidy Turley

Job Sectors Growing/Shrinking

Professional & Business Services Leisure & Hospitality Education & Health Services Manufacturing Retail Trade Other Services Financial Activities Government Information

result will be that the warehouse sector will continue to see strong absorption gures and falling vacancy. The warm winter weather was a clear factor for the drop-off in March hiring, particularly in the retail sector. In fact, nearly all of the job growth in retail from November to January was negated by the losses in February and March. One of the more disconcerting gures released in the March employment report were those on labor force participation. In the prior two months, the labor force had been expanding by an average of 492,000; in other words, nearly one million more people began looking for work -- an encouraging sign that job prospects were improving signicantly. In March, however, labor force participation fell by 164,000. True, it is only one data point, but if the trend continues, it could be an indication that the job market recovery is slipping. Despite a lackluster jobs report, most signs suggest the pace of the US economic recovery is accelerating. Consumer spending data on auto sales and retail sales remain healthy, housing is showing clear signs of improvement, equity markets and REIT indices are up 7-10% year-todate, the situation in Europe has stabilized based on declining sovereign debt yields -- the list of stronger data goes on. While it would have been reassuring to have another robust jobs report, one disappointing report does not change the upward trajectory.
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-2%

-1%

0%

1%

2%

3%

Mar-12 over Mar-11, SA

Source: BLS; Cassidy Turley

U.S. EMPLOYMENT TRACKER

April 2012

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 48.9 22.6 22.4 21.5 10.1 40.7 14.7 12.9 64.9 2.9 22.9 28.1 5.7 6.3 85.7 7.2 12.9 4.4 13.7 12.6 21.3 1.4 18.3 14.2 89.5 11.8 6.6 6.1 33.3 19.9 14.1 11.4 -6.0 10.8 19.2 25.7 33.8 -1.4 20.6 33.8 4.1

Ofce-Using* (000s)
17.8 7.4 6.0 3.5 6.0 18.2 -1.5 3.4 20.0 3.4 6.6 16.1 -0.2 -0.2 22.0 3.7 4.6 -3.1 7.8 4.5 0.9 0.8 13.4 7.2 48.5 5.4 1.9 3.1 8.0 5.9 -0.9 2.7 0.0 4.4 13.4 14.2 4.5 0.0 8.7 2.6 5.4

Industrial Sector* (000s)

10.2 4.3 -6.3 7.0 4.9 11.2 8.1 2.1 15.2 0.3 -0.1 18.7 -2.5 2.8 11.7 0.3 3.3 2.0 -5.5 0.6 4.1 3.2 5.2 1.4 -1.7 1.3 -0.1 -0.1 2.8 1.6 3.6 1.6 -0.1 -2.9 -0.9 3.2 15.7 3.6 0.4 -0.8 -0.7

Unemployment January 2012

8.8% 6.1% 6.8% 6.2% 9.9% 9.4% 8.0% 6.9% 7.1% 8.0% 7.6% 10.1% 8.4% 7.9% 7.3% 8.0% 6.5% 12.7% 11.8% 8.8% 10.3% 7.3% 5.5% 6.7% 9.1% 8.7% 9.4% 8.4% 7.5% 6.8% 8.0% 8.0% 10.8% 8.9% 7.3% 8.8% 7.9% 7.7% 9.4% 5.3% 9.5%

% Chg
2.1% 2.9% 1.7% 0.9% 1.2% 1.0% 1.5% 1.4% 2.2% 0.8% 1.9% 1.6% 0.6% 0.9% 3.4% 0.8% 1.3% 0.6% 0.4% 2.1% 2.1% 0.2% 1.1% 1.9% 1.7% 1.2% 0.7% 0.2% 2.0% 1.7% 1.4% 2.3% -0.7% 0.9% 2.0% 3.0% 2.0% -0.1% 1.8% 1.4% 0.8%

% Chg
2.9% 4.2% 2.1% 0.5% 2.6% 1.7% -0.6% 1.4% 2.7% 4.7% 1.9% 3.7% -0.1% -0.1% 4.1% 1.9% 1.8% -2.1% 0.8% 3.6% 0.4% 0.5% 3.1% 4.3% 3.2% 2.2% 0.8% 0.5% 2.4% 2.4% -0.4% 2.0% 0.0% 1.5% 4.3% 5.8% 1.1% 0.0% 2.9% 0.3% 4.2%

% Chg
2.5% 4.2% -4.0% 2.0% 3.5% 1.3% 4.1% 1.5% 2.8% 0.5% -0.1% 5.6% -1.6% 3.2% 2.4% 0.2% 2.0% 2.7% -0.8% 0.4% 2.5% 1.8% 1.7% 1.1% -0.3% 0.7% -0.1% 0.0% 1.1% 0.9% 1.8% 2.7% -0.1% -1.8% -0.9% 1.6% 5.2% 1.7% 0.3% -0.5% -1.6%

* 3-month moving avg Dec 11 to Feb 12-over-Dec 10 to Feb 11

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