• U.S. Macro Model Briefing Note

    Jan 31, 2019, 08:59 AM by Nikhil Mohan
    Econometric Advisors’ U.S. macro model is a compact model that captures the main high-level features and interactions of the U.S. economy, including the macroeconomic variables needed to drive EA’s metro-level real estate forecasts...
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  • August jobs report: Job gains & wage growth top expectations

    Sep 7, 2018, 14:11 PM by Nikhil Mohan
    The U.S. economy added 201,000 jobs in August, beating market expectations. Unemployment remained at 3.9%, while labor force participation fell slightly, to 62.7%. Revisions lowered the new jobs tally for June and July by 50,000. Having averaged 207,000 new jobs monthly, this year likely will be the strongest for employment since 2015. Year-over-year wage growth was 2.9%—a sign that wages might finally rise higher after years of sluggish gains. Financial markets' mild reaction today suggests that they will wait to see whether wage growth continues its upward trend in the coming months...
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  • Trade disputes so far having little impact on CRE

    Jul 18, 2018, 12:10 PM by Nikhil Mohan
    The U.S. and China recently imposed import tariffs on $34 billion worth of each other’s products, and may add more in weeks to come. The U.S. has also threatened tariffs on imports from Europe, Canada and Mexico; if we followed through, they would likely respond in kind. Given that imports require more space than exports, should trade disputes escalate, demand for U.S. industrial will likely decline...
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  • Rising trucking costs could mark a tipping point for U.S. consumer prices

    Jun 21, 2018, 08:43 AM by Nikhil Mohan
    A significant (and worsening) shortage of truck drivers is raising shipping costs, which may spark the expected inflationary pressures that have thus far remained absent...
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  • May jobs report: Strong jobs gains across industries, with modest wage growth

    Jun 1, 2018, 14:30 PM by Nikhil Mohan
    May’s jobs report might signal that the U.S. economy, after modest growth in Q1, is back on the move despite geopolitical and trade tensions. Outsized gains in retail, construction and manufacturing suggest an economy that is firing on all cylinders. Although wage growth also beat expectations in May, at 2.7% year over year, it remains well below historic trends.

    Financial markets have been jittery lately over trade tensions and political unrest in Italy; the 10-year Treasury yield dipped below 2.8% on May 29. Stronger jobs numbers have pushed the yield back above 2.9%, however, and the dollar index has gained 0.2% as of today...
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  • April Jobs Report: Unemployment Lowest Since 2000; Slow Wage Inflation Cools Bond Market

    May 4, 2018, 12:55 PM by Nikhil Mohan
    Monthly jobs reports continue to offer a mixed picture of the economy. April's job gains were lower than expected, while unemployment fell due to 236,000 leaving the workforce. Wage growth continued to puzzle, slowing despite the shrinking labor pool. Although low jobs numbers and slower wage growth might suggest slowing economic growth, lower employment gains might indicate that the labor market is reaching its limit, making an acceleration in wages imminent. The underemployment rate will be a key metric in the coming months; the still-high rate is often seen as a sign that the labor market has yet to reach capacity, explaining why wages haven’t increased significantly...
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  • Q1 GDP stronger than anticipated

    Apr 27, 2018, 14:29 PM by Nikhil Mohan
    U.S. GDP grew at an annualized rate of 2.3% in Q1—slower than Q4's 2.9% but quicker than the 2.1% consensus estimate. The better-than-expected performance came even though the economy was rattled by volatile stock markets and the announcement of potential tariffs on certain imports. Growth slower than the previous three quarters was due to weaker contributions from personal consumption expenditure, non-residential fixed investment, exports and government spending. Despite a buildup in inventories, slightly slower import growth subtracted a little from overall GDP growth...
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  • Is a Fiscal-Monetary “Collision” Imminent?

    Apr 6, 2018, 15:52 PM by Nikhil Mohan
    A poorly timed fiscal stimulus—in the face of tighter monetary policy and an economy that has reached or is near its potential—could leave the economy weaker in the years to come.
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  • March Jobs Report: Employment Growth Slows; Wage Growth Rises

    Apr 6, 2018, 14:30 PM by Nikhil Mohan
    Monthly job growth has averaged a relatively strong 202,000 for the past three months, but remains volatile, as do revisions. Average hourly earnings rose slightly in March. Wages have risen by 2.7% this year. In these results, there is no reason to think the Fed might change course in its normalization of monetary policy. Markets have already priced in two additional rate increases this year. The Fed could consider a third increase if wage growth remains above 2.5%, given uneven productivity growth.
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  • The potential impact of rising steel prices on commercial real estate

    Mar 22, 2018, 15:02 PM by Nikhil Mohan
    President Trump’s recent executive order imposing tariffs on steel and aluminum imports (25% and 10%, respectively) could increase the cost of commercial real estate construction. Costs will vary by asset type, local market conditions and materials used, but high-rise office and industrial building construction costs could rise modestly. While commodity prices have fluctuated in recent years, the primary driver of higher construction costs has been a scarcity of skilled labor, particularly in metro areas with the most development activity.
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  • February Jobs Report: Employment growth surprises to the upside, wage growth does not

    Mar 9, 2018, 13:52 PM by Nikhil Mohan
    Employment gains continued to surprise to the upside in February. Meanwhile, wage growth slowed slightly—after the strong January increase that led investors to believe higher wage growth might be imminent. February’s report may quell some of that concern. Hiring increases were broad-based and robust in the construction, retail trade, manufacturing, professional & business services, financial activities, health care and mining sectors.
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  • January Jobs Report: Strong hiring leads to greater wage growth

    Feb 2, 2018, 11:50 AM by Nikhil Mohan
    The economy started off 2018 on a strong note, with employment gains surprising on the upside. Job growth has slowed in the past two years but remains solid. A tighter labor market may finally be translating into greater pay increases for workers—wages saw their largest increase since 2009 in January. Hiring was broad-based and robust in the construction, manufacturing, food services and health care sectors, with employment continuing to trend upward.
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  • U.S. Interest Rate Outlook: 2018 and beyond

    Feb 1, 2018, 13:45 PM by Richard Barkham
    Our near-term expectations.
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  • GDP rises 2.6% in Q4; trade & inventory weigh down growth

    Jan 26, 2018, 13:15 PM by Nikhil Mohan
    Gross Domestic Product grew at an annualized rate of 2.6% in Q4—slower than both the 3.2% registered in Q3 and the 3.0% consensus estimate. The weaker-than-expected growth reflected some drag from net exports and inventories, which somewhat offset the quarter's strong consumer spending. Government spending rose 3%, amid post-hurricane rebuilding efforts. For the year, GDP grew by 2.3% in 2017, up from 1.5% in 2016.
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  • Addressing recent discrepancies in the industrial TW Rent Index

    Jan 15, 2018, 14:08 PM by Nikhil Mohan
    Our rent index was lower in Q3. Here's why.
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  • December Jobs Report: Employment growth cools as wages rise modestly

    Jan 5, 2018, 15:06 PM by Nikhil Mohan
    December saw 148,000 jobs added—less than the consensus expectation for 190,000. Hiring was broad-based, although retail jobs decreased by 20,300 despite reports of a strong holiday shopping season.
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  • We expect industrial net absorption to drop from 190 MSF in 2017 to 75 MSF in 2019. Why?

    Dec 1, 2017, 12:24 PM by Nikhil Mohan
    Lower employment growth—we expect 0.88% in 2018 and -0.33% in 2019—will have negative implications for availability and rents as well.
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  • June rate rise: Another 25-bps increase by the Fed

    Jun 14, 2017, 16:28 PM by Nikhil Mohan
    Since the Fed resumed its (so far, incremental) increases in December, long-term rates have remained stable, keeping cap rate increases limited. CRE fundamentals remain strong, so improved economic growth should lead to an extended cycle.
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  • Millennials aren't the only ones dragging down homeownership

    Apr 17, 2017, 14:23 PM by Nikhil Mohan
    CBRE EA is engaged in exploring the implications of a turn in home purchase attitudes among millennials.
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