August Economic Data Results Sep 8

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September 8, 2014A Cushman & Wakefield Research Publication

RESEARCH REPORT - WEEKLY ECONOMIC UPDATE

EMPLOYMENTDISAPPOINTMENTDOESNT INDICATE AWEAKER ECONOMY

Motor vehicle sales surged to the highest level in more thaneight years and the Institute for Supply Managements (ISM)monthly Purchasing Managers Indices rose, indicating strongeactivity in both the manufacturing and non-manufacturingsectors.

Job growth in August was a disappointment. The U.S. economyadded 142,000 jobs, the smallest increase since last December.In addition, the level of employment in both June and July wasrevised downward s lightly.

Of ce-using employment growth remains solid. The U.S.economy added 51,000 of ce-using jobs in August, markingthe fth consecutive month that job growth has exceeded50,000.

The unemployment rate declined, but this was a resultof a drop in labor force participation, as workers remaindiscouraged about job prospects.

THE FIRSTECONOMIC DATAFOR AUGUST WAS

RELEASED LAST WEEKAND IT WAS MOSTLYPOSITIVE, ALTHOUGH

THE GROWTHIN PAYROLLEMPLOYMENT

WAS SMALLER THANEXPECTED.

48

50

52

54

56

58

60

2010 2011 2012 2013 2014

Manufacturing Purchasing Managers' Index

Source: Institute for Supply Management. Note: A reading above 50 means manufacturing is expanding

MANUFACTURING PURCHASINGMANAGERS INDEX

U.S. auto producers reportedthat sales in the month of August

climbed to an annual rate of17.5 million cars

BIG NEWS!Motor vehicle sales surge


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JUNE 2, 201September 8, 2014


Ken McCarthySenior Managing DirectorEconomic Analysis and Forecasting

(212) 698 [email protected]


The early data on the performance of the economy in August wasreleased last week and it showed a mixed picture. Two privatesector business surveys from the ISM were very positive andmotor vehicle sales soared, but employment growth was muchslower than expected.

U.S. auto producers reported that sales in the month of Augustclimbed to an annual rate of 17.5 million cars, the strongest monthsince January 2006. U.S. consumers are likely to make 2014 thebest year for the auto industry since 2006.

The Institute for Supply Management reported that the purchasingmanagers indexes for manufacturing and non-manufacturing

industries both climbed sharply. The manufacturing index was atthe highest level since early 2011 and the non-manufacturing indexrose to its highest level since 2006. These indexes suggest a highlevel of con dence in the business community about the currentstate of the economy.


RESEARCH REPORTWEEKLY ECONOMIC UPDATE


However, this positive news was offset by the unexpectedly weak jobs report. The U.S. economy only added 142,000 people topayrolls in August. The slowdown was exacerbated by downwardrevisions of approximately 30,000 to job growth in both June and

July. The August increase was the slowest since last Decemberand breaks a string of six consecutive months in which jobgrowth exceeded 200,000.

Sectors with signi cant growth included professional andbusiness services (+47,000 jobs), education and health (+37,000),construction (+20,000) and leisure and hospitality (+15,000).The growth in construction employment is particularlyheartening because these tend to be better-paying jobs. Over thepast 12 months, the economy has added 232,000 construction

jobs, the largest 12-month increase since the 12 months toSeptember 2006.

51,000

OFFICE-USING JOBS

INCREASE

UNEMPLOYMENTRATE

DECREASE

6.2% in July to

6.1% in August

3 6 0

2 2 6

2 4 3

9 6

1 1 0

8 8

1

6 0

1 5 0

1 6 1

2 2 5

2 0 3

2 1 4

1 9 7

2 8 0

1 4 1

2 0 3

1 9 9

2 0 1

1 4 9

2 0 2

1 6 4

2 3 7

2 7 4

8 4

1 4 4

2 2 2

2 0 3

3 0 4

2 2 9

2 6 7

2 1 2

1 4 2

0

50

100

150

200

250

300

350

T h o u s a n

d s o

f P e r s o n s

Payroll Employment Change(Change From Previous Month)

Monthly Change 6-Month Moving AverageSource:U.S.Departmentof Labor,Bureau of Labor Sta

PAYROLL EMPLOYMENT CHANGE (CHANGE FROM PREVIOUS MONTH)


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JUNE 2, 201September 8, 2014


Ken McCarthySenior Managing DirectorEconomic Analysis and Forecasting

(212) 698 [email protected]



RESEARCH REPORTWEEKLY ECONOMIC UPDATE


The number of of ce-using jobs in the U.S. economy is at an all-timehigh and growing strongly. Job growth in both the professional &business service sector and the nancial sector boosted of ce-usingemployment by 51,000 jobs despite a decline in the informationsector. The decline in information employment, which shed 3,000

jobs in August, was centered in the motion picture and recordingindustry. In August, that industry lost 6,000 jobs and since July 2013,it has shed over 59,000 jobs.

The weakness in this report also includes anomalies, so wewould not be surprised to see a rebound in growth in September.Employment growth slowed in the manufacturing sector, which was

at in August after adding 64,000 jobs in the previous three months.This weakness is surprising given the August purchasing managersreport. Employment in the retail sector fell by about 8,400 jobs,after rising by an average of 28,000 in the previous ve months.The decline in retail appears to be partially related to a labordispute. Its likely that this decline will be reversed in Septemberas the dispute has been resolved.

The unemployment rate declined from 6.2% in July to 6.1% inAugust, but this was more a result of a decline in the labor forcethan rising employment. In fact, the labor force participation ratedropped to 62.8%. It has been hovering around that level, the lowestsince 1978, for most of the past year. This re ects the fact that

there are still a lot of discouraged workers who are not yet activelyseeking jobs because they do not feel employment prospects aregood.

Overall, the healthy data reported by the ISM and the strong motorvehicle sales report suggest the economy is on a much sounderfooting than the employment report indicates. Even with thedisappointing August report, job growth in 2014 has been robust.In the rst eight months of the year, the U.S. economy has added1.72 million jobs, the strongest eight-month growth since 2005.

We remain optimistic that the economy is now growing at thestrongest sustained pace since the recovery began ve years ago.

If we are correct in this, the economic environment for commercialreal estate is the best we have seen since the mid-2000s.

EVEN WITH THEDISAPPOINTINGAUGUST REPORT,

JOB GROWTH IN

2014 HAS BEENROBUST.

The labor force participation rate droppedto 62.8%. It has been hovering around that

level, the lowest since 1978, for most ofthe past year.

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August Economic Data Results Sep 8