Executive Summary

• 701,000 jobs were lost in March, far surpassing expected losses.
• January and February employment reports were revised down by a combined 59,000 jobs, putting the three-month average in negative territory.
• The unemployment rate rose nearly a full percentage point to 4.4%, while the labor force participation rate decreased by 7 basis points to 62.7%.
• March marked the end of 113 consecutive months of job growth—the longest stretch in U.S. history.
• Sharp job losses were not fully captured due to timing of employment surveys, which are completed around mid-month; job losses will accelerate in April as the clampdown on economic activity to contain the virus continues.

Commercial Real Estate Highlights

• Office: Office-using sectors lost a total of 53,000 jobs in March. Financial activities lost 1,000 jobs and professional & business services lost 52,000. Beyond concentrated losses in administrative services, office-using subsectors showed varying degrees of resilience at this early stage.
• Industrial: Warehousing & storage jobs increased by 8,200 in March, bringing the three-month average to 7,700 per month. Strong demand for e-commerce likely will help insulate this sector. The manufacturing sector lost 18,000 jobs, bringing its three-month average loss to 9,000 jobs per month.
• Retail: Food services & drinking places lost 417,400 jobs in March (nearly 60% of total job losses), while the broader retail sector lost 46,200 jobs. This put three-month averages well into negative territory across categories.
• Construction: The construction sector lost 29,000 jobs in March, bringing the three-month average gain down to 16,700 per month. Losses were concentrated in non-residential construction. Broader conditions will continue to weigh on the sector as uncertainty increases and economic activity slows.
• Health Care: Perhaps surprisingly during a pandemic, the health care sector lost 42,500 jobs. These losses were highly concentrated in ambulatory health services (outpatient services), while hospitals gained 2,000 jobs.
• Multifamily: A deteriorating labor market will affect demand for multifamily over the short term, as household formation slows and affordability issues increase. Once economic activity stabilizes, secular shifts in demand should help the sector’s recovery.
• Hotels: The hotel sector remains hard hit by the cessation of non-essential travel and lost 28,900 jobs in March. Negative impacts on the sector will continue until travel restrictions are lifted.

The Bottom Line

While reflecting the worst month of job losses since the Great Recession, the March jobs report did not fully capture the steep drop in employment due to the mid-month timing of surveys. The magnitude of job losses will be more fully reflected in next month’s employment report.

This downturn in the labor market is unique in that steep job losses were precipitated by a forced shutdown of wide swaths of the economy. Policy responses have included a focus on preserving the supply side of the economy. The recent federal CARES Act stimulus package should enable a faster recovery by providing liquidity support to businesses, including forgivable loans for small businesses and capital to back new credit facilities for larger businesses. All of this is meant to limit job losses through this period of crisis.

Nevertheless, damage from sudden economic sector shutdowns and the inevitable lag for fiscal policy to impact dynamics will affect the broader economy and property markets. We expect this will continue over the near term and that Q2 will be very difficult, but there are reasons to be more sanguine about the second half of the year. These include an expected slowing rate of infections and the potential for medical advances, along with the benefits of unprecedented levels of monetary and fiscal stimulus working through the economy. As these factors facilitate a return to growth, property market dynamics will also improve.