I recently heard an interesting take on the unemployment rate. It centered on absolute employment levels related to occupancy of real estate.
The stubborn level of the unemployment rate is very difficult at a human level and also affects the Federal Reserve policy to remain stimulative. Therefore, it positively affects the capital markets, which impact real estate pricing.
Interestingly though, from a “butts in seats” real estate occupancy perspective, we lost 8.7 million jobs and have only had about 2 million job gains since the bottom. However, job growth has accelerated slightly to 200,000 to 250,000 jobs a month, and is projected to continue to accelerate.
So, what is an interesting take on absolute employment versus unemployment, is that by 2013 we could have the same level of jobs—or “butts in seats”—as the peak occupancy, and it is unlikely there will be much in the way of deliveries by then.
Although it is likely unemployment will remain above where any of us would like it to be, due to new entrants to the employment pool, we might very well face very strong occupancies by 2013!
Michael W. Dardick is president and CEO of Granite Properties Inc., which he founded in 1991. Contact him at [email protected].
