Intelligent Investment

Economic Watch: December Job Growth Disappoints; Labor Market Remains Strong

January 7, 2022 3 Minute Read

Executive Summary

  • The U.S. added 199,000 jobs in December, significantly below expectations of 422,000. This lower-than-expected improvement does not reflect the recent spike in COVID-19 cases due to the omicron variant, which could hamper job growth in January.
  • Leisure & hospitality gained 53,000 jobs, the most of any sector.
  • The labor participation rate was unchanged at 61.9%, the unemployment rate fell more than expected (-30 basis points) to 3.9% and average hourly wages increased by 4.7% year-over-year.
  • Job growth in October and November was revised up by 141,000. The separate December household survey, which is the basis for the drop in the unemployment rate, also was stronger. Consequently, December job growth likely will be revised higher, continuing the pattern of upward revisions over the past several months.
  • CBRE continues to maintain a positive outlook for the economy and real estate in 2022, despite increased uncertainty over the omicron variant. We also expect the Fed to tighten monetary policy in 2022 by ending asset purchases (quantitative easing) and raising interest rates.

Impacts on Commercial Real Estate


Office-using jobs increased by 51,000 in December. Professional & business services gained 43,000 and financial activities added 8,000. Although the omicron variant is clearly disrupting work routines and a return to the office, this job growth bodes well for demand looking beyond the current wave of COVID-19 infections.


The warehousing & storage sector gained 5,000 jobs in December and manufacturing added 26,000. Healthy consumer balance sheets, improvements in supply chain operations and changes in consumer preferences continue to point to strong performance for industrial & logistics real estate.


Traditional retail lost 2,100 jobs in December, while food services & drinking places added 42,600. Full impacts of the omicron variant are not reflected in these numbers due to the timing of the employment survey. Some volatility in retail’s recovery could occur as the public health situation evolves. Still, a strong labor market and healthy consumer balance sheets underpin positive expectations for retail in 2022.


The construction sector gained 22,000 jobs in December, with non-residential construction up by 3,700. Although disrupted supply chains and labor shortages will remain problematic over the near term, the outlook remains positive, underpinned by strong economic growth and low interest rates.

Health Care

Health care lost 3,100 jobs in December. Ambulatory health care (outpatient services) added 8,100, while hospitals lost 5,100 and nursing & residential care lost 6,100. Hiring in the sector continues to be impacted by the pandemic; however, long-term trends support demand for health-care real estate.


Accommodation services gained 10,000 jobs in December; however, the omicron variant could create a more volatile recovery of the sector in the months ahead. Although business and international travel will be most impacted, we expect recovery to resume as the omicron wave of infections wanes.


Continued job growth and strong wage growth will support household formation. As economic activity recovers in large cities and COVID-19 infections subside, urban multifamily markets should see additional improvement. We continue to expect that strong demand, amid a shortage of new housing, will support the sector.

The Bottom Line

December job growth was well below expectations. Still, the strong household survey and wage growth, as well as upward revisions to October and November job gains, indicate the labor market remains robust. An upward revision to December job growth is likely. As such, we expect the Fed will reduce monetary stimulus by stopping quantitative easing, raising interest rates and potentially shrinking its balance sheet. CBRE expects the Fed to increase the federal funds rate at least two times in 2022, most likely starting in Q2.

In the near term, market volatility is likely during Q1 2022. Despite this expectation, we anticipate that the U.S. economy will continue to expand (thanks to effective COVID vaccines and therapeutics), supporting real estate demand as the year progresses. Still, short-term volatility will be apparent in the office, retail and hospitality sectors. Industrial and multifamily fundamentals will remain resilient.