Jobs report doesn’t bode well for commercial real estate recovery

We aren’t seeing enough signs like this today.

The news coming from commercial real estate pros across the Midwest has been good lately. John Sheahan,  a principal with St. Louis’ NAI Desco told me that commercial real estate activity is on the rise in his city. Kenneth Block, managing principal of Kansas City-based Block Real Estate Services, told me the same thing.

And they’re not alone. In the last month, commercial real estate pros from markets such as Cleveland, Topeka, Columbus and Davenport, Iowa, have told me that they’ve all seen more leasing and sales activity in their markets.

But they all added one warning: These recoveries could be slowed or even stamped out if the national economy takes another downswing. And the latest jobs numbers released by the U.S. Department of Labor’s Bureau of Labor Statistics suggest that another economic slump might not be so far fetched.  It might even be likely.

The U.S. economy created just 69,000 jobs in May, the lowest this number has been in a year. At the same time, the national unemployment rate rose slightly to 8.2 percent from 8.1 percent one month earlier. That’s a small increase, but it’s also a bad sign. That’s the first time the unemployment rate has risen in 11 months.

Doug Duncan, the chief economist with Fannie Mae, wasn’t happy with these numbers. In a written statement, Duncan lamented that the disappointing jobs numbers means that the country will have to wait longer for a true recovery in the housing market. And let’s be honest, until the housing market bounces back, everything else, including commercial real estate, will suffer.

“If this pattern recurs, we expect that hopes for a meaningful housing recovery will be delayed once again,” Duncan said in his statement. “Recent signs of improving sentiment seen in our National Housing Survey over the past few months reflect consumers’ more optimistic job and income prospects, which are unsupported by today’s report.”

If that isn’t depressing, I don’t know what is. Even worse, there doesn’t appear to be much hope on the horizon. Unemployment continues to be a drag on our economy. Until it really starts to fall — and not the seemingly illusory drops of the last year — don’t expect that much-awaited robust recovery in either the housing or commercial real estate markets.

– Dan Rafter

 

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