Research Brief: Employment March 2023

February Hiring Reflects Strong Labor Market, but Complications Fed Outlook

Excerpt of Full Report:

Job growth continues at generally swift pace. Employers added a net 311,000 personnel to payrolls in February, down from January’s robust 504,000-position gain, but still above the long-term monthly average. Hiring was likely aided by an expansion to the labor pool last month, leading to a 10-basis-point uptick in the unemployment rate to 3.6 percent. Despite this slight increase to unemployment and a slowdown in job growth, the labor market is still showing remarkable strength, with multiple sectors continuing to demand additional labor.

Recent employment metrics reflect diversifying travel. Hiring last month was led by the leisure and hospitality sector, with the creation of 105,000 jobs. The total headcount has now climbed within 3 percent of the February 2020 level, a marked improvement after the pandemic effectively cut the sector in half. Employment growth in these fields in part reflects greater travel. Hotel occupancy through the opening two months of 2023 outperformed the same spans in 2021 and 2022. This performance was driven predominantly by more weekday bookings, with Tuesday-Thursday occupancy averaging above 60 percent in February for the first time since before the health crisis. This trend speaks well of business and international travel, building upon already strong weekend-centric domestic vacationing to help hotel performance advance further.

Mounting costs to play into construction post-2023. The creation of 24,000 construction jobs last month is a positive sign for a field that historically contracts early in recessionary periods. Future sector hiring could face headwinds, however, as higher financing and material costs dissuade some developers from starting new projects. While the current pipeline is robust — particularly in the multifamily and industrial sectors — looking past this year, building activity is likely to slow. One factor that could help preserve construction payrolls, however, is the ample government support for new infrastructure projects. Personnel wrapping up private buildings could be pulled onto some of these projects, stabilizing staffing and benefiting nearby real estate.

Implications for the Federal Reserve

Prime-age labor participation restored. Participation in the labor force by people ages 25 to 54 returned to a pre-pandemic rate of 83.1 percent last month. While an important milestone for the prime working age cohort that potentially releases some pressure from the labor market, improving participation among other age groups will be more challenging. Many older individuals retired early, and are less likely to return. Increasing staff counts will ultimately require backfilling with new entry-level positions staffed by younger workers, a process limited by both experience and population size

Recent events shift Fed meeting prospects. Last month’s expansion to the labor force was joined by a slowdown in wage growth. Both trends could point to a softening labor market, something the Federal Reserve is looking for as the organization considers how much to adjust the overnight lending rate later this month. Given the recent and sudden closure of Silicon Valley Bank and Signature Bank, market participants expect the most likely outcome of the Fed’s March 22 meeting to be a 25-basis-point hike.

Denver Office:

Adam Lewis Vice President, Regional Manager

Tel: (303) 328-2000 | adam.lewis@marcusmillichap.com

Prepared and Edited By:

Benjamin Kunde Research Analyst | Research Services

For Information on national multifamily trends, contact:

John Chang Senior Vice President, National Director | Research Services

Tel: (602) 707-9700 | john.chang@marcusmillichap.com

The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain accurate and complete information; however, no representation, warranty or guarantee, express or implied, may be made as to the accuracy or reliability of the information contained herein. Note: Metro-level employment growth is calculated based on the last month of the quarter/year. Sales data includes transactions sold for $1 million or greater unless otherwise noted. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered as investment advice. Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Real Capital Analytics; RealPage, Inc. © Marcus & Millichap 2021 | www.MarcusMillichap.com