BK Perspective Real Estate USA 2016

Perspective on Real Estate 2016 - U.S.
particularly in goods-producing sectors (see Fig. 2.5),
certainly had a role in holding back the pace of job
growth versus a year ago. But tightening labor market
conditions are an obstacle to higher growth as well,
with headline unemployment at just 5.0%.
“The last time initial
unemployment claims were near
this level was late 1999 and you
would need to go back to the 1970s
to find a lower level.”
Figure 2.5 shows initial unemployment claims
trending to extremely low levels. In fact, the last time
claims were near this level was late 1999 and you
would need to go back to the 1970s to find a lower
level. The U.S. is at, or near, a level most economists
would call full employment, a condition that is having
positive implications for wage growth, household
formation and consumer spending.
Clearly not all sectors are created equal in terms of
their performance over the past year, or even through
the recovery and expansion for that matter. Greater
detail on employment performance is provided in
Figure 2.6. The U.S. economy still employs 13.2%
fewer construction workers than it did prior to the
Great Recession, while healthcare employment has
expanded by 18.1% from its prerecession level and
education is not far behind, at 16.9%. Education
and healthcare have been the stalwarts of the U.S.
economy throughout this cycle and collectively they have
shown a modest increase in momentum versus a year
ago. Healthcare in particular has been among the
fastest-growing sectors in the U.S. over the past year.
From a real estate investment perspective, it has
been prudent to target locations that have high
exposure to major education and healthcare
institutions. We believe this is a strategy that will hold
true through cycles, given the stability of these jobs
and the ancillary benefits they provide to other areas
of the economy.
Education is big business in metros such as Boston,
New York and San Francisco, which “export”
Fig. 2.5
Labor Market Trends
Y/Y % Job Growth
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
-0.5
-1.0
-1.5
-2.0
01
12
Unemployment
Government
Private Sector - Services
03
12
05
12
07
12
09
12
11
12
*Average weekly initial unemployment claims
Total Employment
Private Sector - Goods
01
13
03
13
05
13
07
13
09
13
11
13
01
14
03
14
05
14
07
14
09
14
11
14
01
15
03
15
05
15
07
15
09
15
11
15
500
475
450
425
400
375
350
325
300
275
250
225
200
Source: U.S. Bureau of Labor Statistics
*Unemployment Claims (000s)
16 | Bentall Kennedy (U.S.) Limited Partnership