October payrolls increase: Good news for office REITs



The Employment Situation Report

The Bureau of Labor Statistics puts out the Employment Situation Report. It contains all sorts of important data points regarding the state of the labor market—from the payroll data to the unemployment rate, the labor force participation rate, average hourly earnings, average weekly hours, and other key points.

These data are also broken down by demographics, making this report an important tool for investors. Check out the end of the report, where you’ll find links to all sorts of tables and historical data.

Nonfarm Payrolls

The establishment and household surveys

The employment situation report is based on data from two different surveys:

  1. The Current Population Survey, also known as the household survey
  2. The Current Employment Statistics Survey, also known as the establishment survey
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The household survey provides information on the labor force, employment, and unemployment. The establishment survey covers employment, hours, earnings, and payrolls. The household survey covers the entire non-institutionalized civilian population. Meanwhile, the establishment survey covers people working in the private sector or government.

Payroll data

In October, payrolls increased by 214,000, below Wall Street expectations of 235,000. The ADP survey—prepared by ADP, LLC—predicted the number would come in at 230,000. But the ADP numbers predict the final revisions, not the initial survey.

Private payrolls increased by 209,000 while manufacturing payrolls rose by 15,000. Private services payrolls increased by 181,000. Government employment increased by 5,000 jobs.

Implications for office real estate investment trusts (or REITs)

Vacancy rates drive office REITs, including Vornado Realty Trust (VNO), S.L. Green Realty Corp. (SLG), Boston Properties, Inc. (BXP), Douglas Emmett, Inc. (DEI), and Highwoods Properties Inc. (HIW). Vacancy rates are a function of new business creation and the expansion of existing businesses. Increasing employment numbers are good news for these REITs. They’ll help push down vacancy rates, which are still at elevated levels following the Great Recession.


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