Intelligent Investment
Economic Watch: February Job Growth Weaker Than Expected But Still Healthy
March 7, 2025 3 Minute Read
Executive Summary
- The U.S. added 151,000 jobs in February, short of an expected 170,000. Job growth in December and January was revised down by a total of 2,000.
- Health care, financial activities and construction added the most jobs in February. Government added 11,000 jobs despite a loss of 10,000 positions in the federal government. Many of the actions to reduce the federal workforce occurred too late in the month to be captured in the February jobs report.
- The unemployment rate rose by 10 basis points to 4.1%, while the labor force participation rate fell to 62.4%. Average hourly earnings increased by 4% year-over-year.
- The U.S. economy continued to create jobs at a healthy clip in February. But by some measures, economic growth is moderating. This will allow the Fed to lower rates slowly this year.
- Continued job growth is positive for leasing; however, broader uncertainty about government policy changes could weigh on commercial real estate activity.
Impacts on Commercial Real Estate
Office
Office-using jobs rose by 19,000 in February. Financial activities gained 21,000, while professional & business services lost 2,000. Office-using monthly job growth has been inconsistent of late, but several factors are supporting leasing activity. These include continued economic growth, increased office attendance, clarity on corporate tax rates and less government regulations.
Industrial
The manufacturing sector gained 10,000 jobs in February, while warehousing & storage lost 3,100. We expect that demand for industrial & logistics space, although slowing, will remain relatively resilient thanks to continued strength in consumer spending and e-commerce. However, we continue to monitor potential long- and short-term changes to trade policy, which could heavily influence market dynamics.
Retail
Food services & drinking places lost 27,500 jobs in February, while traditional retail lost 6,300. We expect that continued consumer spending will fuel retail leasing demand amid already strong fundamentals. However, potential changes to trade and immigration policy could present a headwind.
Construction
The construction sector added 19,000 jobs in February, exceeding its 12-month month average of 12,000. Although traditionally very sensitive to interest rates, construction activity has been supported by federal policy encouraging large-scale projects.
Health Care
Health care gained 52,000 jobs in February. Ambulatory services employment increased by 25,600, hospitals by 14,900 and nursing and residential care facilities by 11,500. February’s gain was just short of the sector’s monthly average of 53,500 over the past year. We expect that health-care property demand will be bolstered by an aging population’s increasing demand for medical services.
Hotels
Accommodation services gained 3,700 jobs in February. While consumers continue to spend on experiences, we expect this will moderate as overall spending cools.
Multifamily
Multifamily demand is expected to remain strong as high mortgage rates keep home ownership out of reach for some renters. Continued job growth also supports household formation, which will aid absorption of new rental supply.
The Bottom Line
The labor market continues to show resilience with 151,000 jobs added in February, up from 125,000 in January. However, overall job creation will be challenged in coming months as cuts across many federal government departments will have a bigger impact on the labor market.
We expect economic growth to slow to around 2.3% this year from 2.8% in 2024, still strong enough to support continued leasing activity. The recent decline in long-term yields closer to 4% will support investment activity. Nevertheless, federal government policy uncertainty could alter market dynamics in the short and medium terms.
Contacts
Darin Mellott
Vice President, Head of U.S. Capital Markets Research, CBRE
