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BLS Revised Jobs Projections: What It Means for Investors

[Updated: Feb 26, 2021 ] Feb 26, 2021 by Marc Rapport
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The federal Bureau of Labor Statistics (BLS) has just updated its employment projections for the next 10 years as a result of the pandemic, and its assessments provide a useful macro view for real estate investors.

The intent of the report, titled Employment Projections in a Pandemic Environment, is to estimate how potential shifts in consumer spending behavior and workplace structural changes can affect employment levels over the next decade.

In recognition of the continuing uncertainty surrounding the pandemic’s path, the BLS analysts first assessed the pandemic’s immediate impact and then looked at future employment by sector through two different scenarios: strong and moderate long-term effects.

Either way, the numbers point to healthcare/life sciences, computers and technology infrastructure, and residential construction as looking good. Grocery stores are hanging in there. Hospitality, including restaurants and entertainment venues and hotels, not so much.

'Typically well reasoned and sober' projections of what’s ahead

How much stake you want to put in these numbers is up to you, of course, but the BLS has long been considered an authoritative source for this kind of data. Here’s how The New York Times characterized its work: "Long-term projections are often wrong, especially for more volatile sectors like mining and construction, but the agency’s estimates are typically well reasoned and sober."

That assessment was in an article published Feb. 22 titled "The Jobs the Pandemic May Devastate," and it, too, is worth a read to get a feel for who might be left out in the cold, perhaps for good, in a fast-changing labor market.

For our purposes here, let’s take a look at how the BLS thinks things might shake out in areas of particular focus for real estate investors, especially office and retail space. What the agency thinks about employment, it stands to reason, also says something about the businesses where those people work and the spaces they occupy.

The immediate impact: lost jobs and working from home

The BLS says employment fell the most in the hotels/motels sector from February to June, by about 37%. Food services and drinking places jobs fell by 25%. And grocery store jobs? They were up about 4% during that period.

Meanwhile, "teleworking also became more common as a result of the pandemic," the report says. "In August 2020, 24.3% of all employees reported having teleworked at some point in the prior month because of the pandemic."

So, with a fourth of the workforce working from home during that period, how much can we expect the demand for office space to recover? Or, for that matter, the battered hospitality sector, including hotels and restaurants, both of which occupy a lot of commercial real estate across the country?

Well, in both the "moderate" and "strong" impact assessments, healthcare-related professions stand out as job gainers, including pharmaceutical manufacturing and medical equipment and supplies. The same goes for suppliers of technology that support working from home and, pretty much, work anywhere.

Specifically, retail trade jobs are projected now to fall as much as 7.2% in the next 10 years, while jobs with food services and drinking places will fall 3.1%, both in the "strongest" impact scenario. Even harder hit? Traveler-accommodation jobs, projected to fall as much as 8.6% between now and 2029.

Meanwhile, residential construction jobs are expected to rise between 2.1% and 5.0% over the next decade, while nonresidential construction is projected to see an employment drop of 2.0% to 3.8%. On the other hand, research and development jobs in the physical, engineering, and life sciences should see an 8.4% to 12.6% hike in employment by 2029, while pharmaceutical and medicine manufacturing should see about a 19% gain under either impact scenario.

The Millionacres bottom line

A quick takeaway for real estate investors here is that companies engaged in healthcare and life sciences look like promising tenants and solid investments, now and into the next decade. In the world of real estate investment trusts (REITs), that makes one think of outfits like Alexandria Real Estate Equities (NYSE: ARE) and Ventas (NYSE: VTR).

As for another essential industry, here’s a Milllionacres piece to get you started on researching grocery store REITs, as well, beyond the better-known, more diversified retail REITs such as STORE Capital (NYSE: STOR) and Realty Income (NYSE: O).

And as for construction, the clear leaders in the residential construction market, and residential sales in general, could be good candidates among real estate stocks, such as D.R. Horton (NYSE: DHI) and RE/MAX Holdings (NYSE: RMAX).

The BLS says it will do its full revision to its labor force and macroeconomic projections in September for the years 2020-2030 but adds, "As the pandemic situation and the public response to it continue to evolve, uncertainty about the trajectory of the economic recovery is likely to remain elevated in 2021."

Words to the wise.

Again, here’s the link to the entire BLS report. It’s not all that long and we could only brush the surface here of all it implies.

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Marc Rapport owns shares of Realty Income and STORE Capital. The Motley Fool owns shares of and recommends STORE Capital. The Motley Fool recommends Alexandria Real Estate Equities. The Motley Fool has a disclosure policy.