Intelligent Investment

Economic Watch: Labor Market Nearing Peak; No Change Yet in Fed Policy

November 4, 2022 3 Minute Read

Executive Summary

  • The U.S. added 261,000 jobs in October, beating the consensus expectation of 205,000. However, the household survey sent a different message with a sizeable decline of 328,000.
  • Job gains were broad across sectors, with health care, professional & business services and manufacturing having the biggest gains.
  • The unemployment rate increased to 3.7%, as the labor participation rate slightly declined to 62.2%. Average hourly earnings were up 4.7% on a year-over-year basis.
  • Continued strong job and wage growth will keep the Federal Reserve on course to hike interest rates, with a 50-basis-point increase expected in December.
  • Higher interest rates will negatively affect the job and real estate markets over the next several months before they start to recover toward the middle of 2023.

Impacts on Commercial Real Estate


Office-using jobs increased by 42,000 in October, with professional & business services gaining 39,000 and financial activities 3,000. Although the economy continues to generate new office-using jobs, we expect a worsening economic environment to lower demand for office space.


The warehousing & storage sector lost 20,000 jobs, while manufacturing added 32,000. Although we expect higher interest rates to slow the economy, industrial & logistics market fundamentals likely will remain relatively resilient.


Traditional retail gained 7,200 jobs, while food services & drinking places added 6,000. We expect that a slowing economy will reduce demand for retail space in the coming months. Nevertheless, the sector is heading into this period of greater uncertainty with relatively strong fundamentals, as very little retail space has been added to the market in recent years.


The construction sector added 1,000 jobs in October. Specialty trade contractors lost 4,000 jobs as higher interest rates began to subdue new construction.

Health Care

Health care gained 52,600 jobs in October. Ambulatory health care (outpatient services) added 30,700, while hospital employment and nursing & residential care increased by 10,800 and 11,100, respectively. Demand for health-care properties should remain relatively resilient due to an aging population and a return to pre-pandemic patterns of health-care utilization.


Accommodation services added 19,900 jobs in October. Pent-up demand for travel should help limit impacts of an economic slowdown on the sector.


We expect a slowing economy will affect multifamily rents, even though a relatively strong labor market favors the sector. Multifamily demand will be underpinned by single-family housing affordability, exacerbated by rising interest rates and limited supply.

The Bottom Line

The labor market sent mixed signals last month, with the Bureau of Labor Statistics establishment survey showing a strong gain of 261,000 jobs while its household survey showed a loss of 328,000. Average hourly earnings are decelerating but remain elevated, up 4.7% over the past 12 months. The unemployment rate ticked up to 3.7% in October amid reduced labor force participation.

October’s jobs report will not dissuade the Fed from continuing its aggressive monetary policy for now, with a 50-basis-point interest rate hike expected at its next meeting on Dec. 14. The jobs and inflation readings due out before then could influence the size of the Fed’s December rate hike.

Overall, we expect the labor market will soften in coming months as economic growth slows. Higher rates and uncertainty are heavily limiting investment volume and will increasingly weigh on leasing activity. CBRE expects subdued market activity during the next few quarters before conditions become more supportive of a recovery.


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