A Month for Job Creation

The U.S. economy surprised on the upside in May.

The U.S. economy surprised on the upside in May, creating 280,000 jobs, according to the Bureau of Labor Statistics on Friday. That’s a strong surge from April, which was revised slightly downward to 221,000 jobs (the poor showing in March was a little less poor, being revised up from 85,000 to 119,000). The May hiring number was also against expectations of around 220,000¬† new jobs, and might be another arrow in the quiver of interest-rate hawks at the Fed, especially if this is the beginning of another run of strong numbers, as was seen last fall.

The number of jobs created has a direct bearing on the health of commercial and residential real estate: the longer the surge lasts, the more demand for space there is, and so the better for every part of the real estate — with certain exceptions. As the demand for construction workers accelerates, for instance, skill shortages become all too apparent, and costs tend to go up. That’s also partly an overhang from the recession, when a large number of skilled construction workers retired for good, or found work in another industry. In any case, May hiring in the construction sector was 17,000, which was weak compared with April (up 45,000), but the general trend is up. Over the last 12 months, construction employment has increased by 273,000 all together.

Professional and business services added 63,000 jobs in May and 671,000 jobs over the year. This kind of employment has a bearing on office space absorption, and indeed, some of the nation’s strongest office markets are now seeing office development on a significant scale (just this week, for instance, ground broke on the 320,000-square-foot One Belleview in suburban Denver). Some relatively high-paying job classes were expanding in May as well. In May, employment increased in computer systems design and related services (up 10,000), in management and technical consulting services (up 7,000), and in architectural and engineering services (up 5,000).

In a separate survey, the BLS reported that in May the unemployment rate ticked up to 5.5 percent from 5.4 percent. That’s actually good news, since it means that more people are looking for work than before, because more people believe there’s work to be found. Over the last 12 month, the unemployment rate was down by 0.8 percentage points (from 6.3 percent a year ago). The bureau’s U-6 measurement stayed at 10.8 percent in May, the same as in April, but down from 12.1 percent a year ago. U-6 tracks not only the conventionally unemployed, but also everyone marginally attached to the labor force (people who aren’t actively looking for work, but who still could be employed), plus the total number of people employed part time for economic reasons.