Intelligent Investment

Economic Watch: Strong August Job Growth Keeps Fed on Track for Continued Rate Hikes

September 2, 2022 3 Minute Read

Executive Summary

  • The U.S. added 315,000 jobs in August, in line with expectations.
  • The professional & business services and education & health services sectors added the most jobs at 68,000 each.
  • The unemployment rate ticked up by 20 basis points (bps) to 3.7% as the labor participation rate rose by 30 bps to 62.4%. Annual wage growth held steady at 5.2%.
  • This continued strong job and wage growth likely will embolden the Federal Reserve to continue tightening monetary policy, with a 50- or 75-bp increase in the federal funds rate expected later this month.
  • The August jobs report’s implications for commercial real estate are positive, at least for the short-term. However, rising interest rates will increasingly inhibit economic growth, causing many businesses and households to curb spending.

Impacts on Commercial Real Estate


Office-using employment had broad-based growth in August, with the professional & business services sector adding 68,000 jobs and financial activities adding 17,000. While a stronger pace of employees returning to the office after Labor Day should improve overall market fundamentals, persistent remote working trends will constrain demand.


The warehousing & storage sector lost 6,200 jobs in August as the pace of durable goods sales moderated from the 2020-21 boom. On the plus side, the manufacturing sector added 22,000 jobs. The long-term outlook for logistics is bright as e-commerce’s growing share of total spending will generate more space demand.


Traditional retail gained 44,000 jobs in August, while food services & drinking places added 18,200. With strong job and wage growth and easing gasoline prices, consumers continue to spend despite sluggish sentiment. But with inflation continuing to run in the high single digits and excess saving rates evaporating, the pace of consumption during the past 18 months will not persist.


The construction sector added 16,000 jobs in August. Residential building added 2,300 jobs, while non-residential gained just 700. We expect that higher interest rates and a cooling housing market will weigh on the construction sector later this year and next. Multifamily construction will provide upside risk to this outlook.

Health Care

Health care gained 48,200 jobs in August. Ambulatory health care (outpatient services) added 21,900, while hospital employment increased by 14,700 and nursing & residential care added 11,600. With favorable long-term demographics and fewer pandemic-related disruptions, demand for health care facilities should remain positive.


Accommodation services employment increased by 4,300 jobs in August. A solid summer travel season kept demand for labor hot, but a limited supply of workers limited job growth. This sector is poised to face headwinds from slower economic growth and especially high airfare and lodging costs.


Job growth and household formation will drive apartment demand in the short term. Even as the economy cools, higher mortgage rates and home ownership affordability challenges will support this sector. Nevertheless, we anticipate the pace of multifamily rent growth will slow in 2023 as new supply and a weaker economy soften fundamentals.

The Bottom Line

Despite negative GDP growth in the first half of the year, the strong labor market indicates that the U.S. economy is on solid ground. A very encouraging highlight from the August payroll report is that labor force participation for 25- to 54-year-olds has risen back to pre-pandemic levels. This will allow companies to expand and potentially slow the pace of wage growth. But this positive jobs report will also give the Fed a green light to proceed on its aggressive rate-hiking path. This likely will include a 50- or 75-bp hike later this month.

August’s job growth affirms our view that the U.S. has not yet entered a recession and that high inflation may have already peaked but will persist. We expect economic conditions to worsen later this year as it takes time for monetary tightening to impact the real economy. Higher interest rates, financial market volatility and weaker economies overseas eventually will begin to bite. This will weigh on real estate fundamentals and investment volumes later this year and into 2023.

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