The labor market has seen its fair share of ups and downs in 2023. In this blog post, we'll dive into the latest hiring trends, labor disputes, and how these developments might affect the real estate market.
Staffing Additions Hit Eight-Month High
In September, employers across the country created 336,000 new jobs, marking the strongest month for hiring since January. This surge in employment growth extended across a wide range of industries, with notable increases in the leisure and hospitality sector, government roles, professional and business services, and healthcare. These impressive numbers helped maintain the national unemployment rate at a tight 3.8 percent, holding steady below the 4 percent mark for the 20th consecutive month.
Labor Disputes Amidst Favorable Job Growth
While overall job growth has been favorable this year, 2023 has also witnessed profound labor disruptions. Disagreements between employers and unions have resulted in strikes across various sectors. Notable work stoppages have occurred among West Coast longshoremen, Hollywood writers and actors, and automotive manufacturers, to name a few. The Culinary Workers Union in Las Vegas is considering taking similar action, and there have been walkouts at multiple Kaiser Permanente medical facilities. The possibility of federal employees going without pay is looming if a new budget is not approved by November 17.
Implications for Consumer and Corporate Spending
These labor disputes could have a ripple effect on consumer and corporate spending. While some unions have strike funds to assist members with necessary expenses during strikes, these work stoppages create immediate financial uncertainty. This can reduce discretionary household budgets and potentially taper consumer spending, which has been steadily growing this year. To resolve these conflicts, employers may need to make concessions, which would increase their labor costs. This comes at a time when many corporations face the prospect of refinancing maturing debt at notably higher interest rates. Meeting these obligations could divert funds away from new hiring initiatives or other growth endeavors, which could potentially temper the economic growth outlook.
Strikes and Their Impact on Commercial Properties
The labor disputes have implications for local commercial properties, especially multifamily and retail buildings in cities like Los Angeles, Atlanta, New York, and Detroit. For instance, Los Angeles has seen net apartment relinquishments for the past six quarters, although local vacancy rates are still below the U.S. level. New York and Atlanta have positive rental absorption, but elevated development is propping up vacancy in Atlanta. Detroit's multifamily vacancy is in line with the national metric, although retail properties in the metro area are experiencing an asking rent reset. The minimal development in some markets is helping to stabilize local retail vacancy rates.
Immigration Policy Changes and Labor Shortages
One of the factors contributing to labor disagreements in 2023 has been labor shortages in specific industries, such as accommodation and food services. Staffing in these sectors has yet to return to pre-pandemic levels, even as consumer activity at hotels, bars, and restaurants rebounds. The Biden administration's plan to grant Temporary Protected Status to an estimated 472,000 Venezuelan immigrants living in the U.S. aims to aid the work authorization process. This policy change has the potential to unlock additional labor supply and help businesses improve their operations.
As the labor market continues to evolve, it's essential for real estate professionals to stay informed and adapt to changing circumstances. Labor dynamics and disputes can have far-reaching consequences for the economy and the real estate market, making it crucial to monitor these trends and their potential effects on the industry.