Inside the Numbers:
The U.S. economy added 148,000 jobs in September and unemployment declined 10 basis points to 7.2 percent – a 4.5-year low and the third consecutive month of a downward trend. This is slightly down from the average monthly gain of 163,000 jobs that the economy has set over the past six months.
In Chicago the unemployment rate decreased 50 basis points to 9.2 percent. Though the number of unemployed workers declined by 24,000, a majority of the positive gains was due to a reduction in the labor force which contracted by 37,000 workers in August.
After shrinking in July, Chicago’s nonfarm employment base expanded in August and added 56,900 positions year-over-year. In percentage terms, the metro labor market expanded by 1.5 percent in the past 12 months.
Office sectors continued to dominate the gains, taking 52.4 percent of the net new jobs. Since these sectors employ over 1.4 million people in the region, representing 37.5 percent of the total workforce, their growth has positive demand implications for the office market.
Office real estate implications:
Even as the market continues to experience months of slow gear employment gains it still has a ways to go towards replacing all of those lost during the recession.
Based on the average monthly non-farm employment growth that the metro has experienced over the last two years, we expect the local employment market will not be fully recovered until the end of 2016 at the earliest, and this will be buoyed by the overall health in the national economy rather than any local growth spurt itself. Therefore, in order for the metro economic recovery to have a significant impact on office market conditions, growth will need to come from a set of diverse and in some cases, nontraditional sources. This includes insurance and health care providers that are poised to benefit from the health care reform, high-tech industries, expanding or newly established data centers, creative industries such as graphic design and digital architecture and, a relative newcomer to the office sector, expanding co-working or co-locating facilities.
It is these areas of the economy that Chicago’s jobs market will become increasingly reliant on for organic job growth and many of them are either newly emerging in the region or in their industry infancy. In either case, the real estate market is becoming creative and flexible to the diverse needs of these new tenants. An example of this is the growing popularity of spec suites in the CBD and the willingness of landlords to respond and adapt to this demand in order to remain competitive.