Intelligent Investment

Economic Watch: Impressive January Jobs Surge Belies Concerns of Weakening Economy

February 3, 2023 3 Minute Read

Executive Summary

  • The U.S. added 517,000 jobs in January, well above consensus estimates of 187,000. However, the household survey showed a sizeable decline of 328,000.
  • Job gains were broad based but especially pronounced in leisure & hospitality, health care and professional & business services.
  • The unemployment rate fell to 3.4%, its lowest level since 1969. The labor force participation rate remained unchanged at 62.4%. Average hourly earnings were up 4.4% on a year-over-year basis, in line with expectations.
  • A tight labor market complicates the Federal Reserve’s policy path. We expect the Fed to make one more 25-basis-point rate hike in March before holding rates at a range of 4.75% to 5.0% for the rest of the year. However, if economic activity outpaces expectations, an additional rate hike in May is possible.
  • Interest rate volatility will adversely affect commercial real estate markets over the next several months. We expect capital markets activity to remain subdued but begin recovering around midyear, followed by a recovery of leasing activity later in the year.

Impacts on Commercial Real Estate


Office-using jobs increased by 88,000 in January, with professional & business services gaining 82,000 and financial activities 6,000. Despite these gains, slowing economic growth will lessen demand for office space.


The transportation & warehousing sector gained 22,900 jobs last month, while manufacturing added 19,000. We expect industrial & logistics fundamentals to remain relatively resilient despite rising interest rates and slowing economic growth.


Traditional retail gained 30,100 jobs in January, while food services & drinking places added 98,600. Although an economic slowdown will adversely affect retail, the sector benefits from relatively strong fundamentals since very little new supply has been added in recent years.


The construction sector added 25,000 jobs in January, nearly all of them in specialty trade contractors. Non-residential building added 4,000 jobs and residential gained only 100. New construction activity will remain subdued due to rising interest rates.

Health Care

Health care gained 58,200 jobs in January. Ambulatory health care (outpatient services) added 29,900 jobs, while hospitals gained 10,900 and nursing & residential care 17,400. Long-term demand for health-care properties should remain relatively resilient due to an aging population.


Accommodation services added 14,800 jobs in January. A slowing economy will impact the hotel sector but continued pent-up demand for travel may provide a boost.


Multifamily rent growth will ease as the economy slows. We expect the increase in unemployment during 2023 to be relatively mild compared to prior recessions. A relatively strong labor market, along with single-family housing affordability issues exacerbated by rising interest rates and limited supply, will continue to underpin multifamily demand.

The Bottom Line

The headline gain of 517,000 jobs in January was well above expectations, lowering the unemployment rate to 3.4%, its lowest level since 1969. Annual wage growth fell to 4.4% but remained elevated.

January’s impressive job growth belies other indicators of an economic slowdown. Manufacturing activity is declining, price increases are moderating and consumer spending is starting to slow. While the labor market has remained resilient, the Bureau of Labor Statistics’ jobs report is a lagging indicator. CBRE is still forecasting a moderate recession in 2023.

While a tight labor market complicates the Fed’s job, CBRE still expects one more 25-basis-point rate hike next month before holding at a range of 4.75% to 5.0% for the rest of the year. However, if economic activity outpaces expectations, an additional rate hike in May is possible.

Slower economic growth will lessen commercial real estate investment and leasing activity through the first half of the year. As the paths of interest rates and the broader economy become clearer, we anticipate a capital markets recovery to begin around midyear, followed by an increase in leasing activity.


Insights in Your Inbox

Stay up to date on relevant trends and the latest research.