The December jobs report comports with CBRE’s view that the U.S. economy remains strong and still has potential for further growth. This strength has been reflected in jobs that impact U.S. property markets, especially within office, health care, construction and manufacturing. December’s jobs report bodes well for demand across property types as employment gains were broad-based. Healthy wage growth and an increase in the labor participation rate were further indicators that the labor market is strong, carrying implications for future Fed policy.
A key risk factor is the wage inflation rate of 3.2%, which could cause the Fed to raise interest rates too quickly. The Fed has signaled that it expects to raise rates two times in 2019, though the market may expect less, particularly with indicators like the ISM Manufacturing Index showing less robust growth than earlier in the year. The potential for a deeper China/U.S. trade dispute is also a risk. Given that trade issues may not be resolved before March, market volatility likely will continue at least until then.