Intelligent Investment

Economic Watch: Strong December Job Growth Will Keep Fed Cautious

January 5, 2024 3 Minute Read

Looking down on a city.

Executive Summary

  • The U.S. added 216,000 jobs in December, well above consensus estimates of 170,000. Job growth in October and November was revised lower by a combined 71,000 jobs.
  • This better-than-expected jobs report will likely keep the Federal Reserve cautious as it contemplates cutting interest rates.
  • Job gains were concentrated in government, leisure & hospitality and health care. Transportation & warehousing had a sizeable loss.
  • The unemployment rate held steady at 3.7%, while the labor force participation rate decreased by 30 basis points (bps) to 62.5%. Average hourly earnings growth stayed strong at 4.1% year-over-year.
  • While the labor market remains robust, its addition of 2.7 million jobs in 2023 was down from 4.8 million in 2022.
  • Although long-term interest rates declined more than expected in late 2023, we anticipate continued economic uncertainty will weigh on commercial real estate investment and leasing activity during the first half of 2024.

Impacts on Commercial Real Estate


Office-using jobs increased by 15,000 in December, with professional & business services gaining 13,000 and financial activities adding 2,000. Corporate cost cutting and structural changes in office usage will continue to reduce demand for office space over the near term.


The warehousing & storage sector lost 4,900 jobs last month, while manufacturing gained 6,000. Although the slowing economy will impact demand for industrial & logistics space, we expect the sector to maintain relatively strong fundamentals this year.


Traditional retail gained 17,400 jobs in December, while food services & drinking places added 22,100. Retail real estate fundamentals have benefited from steady demand and little new supply in recent years but demand will likely weaken as the economy slows this year.


The construction sector added 17,000 jobs in December, with gains in both the residential and nonresidential sectors. Although high interest rates are impacting the sector, some unique factors—such as a single-family home shortage and fiscal policy supporting manufacturing and infrastructure—have aided it.

Health Care

Health care gained 37,700 jobs in December. Ambulatory health care (outpatient services) added 19,200, while hospitals gained 15,300 and nursing & residential care 3,200. We expect that demand for health-care properties will remain strong in the long term due to an aging population.


Accommodation services added 6,300 jobs in December. We anticipate that travel demand will ease as the economy slows and consumers reduce spending.


The multifamily sector is expected to remain resilient, as high mortgage costs make renting more favorable. While a resilient labor market also provides a tailwind, slowing growth may reduce household formation in the coming quarters.

The Bottom Line

While the jobs market remained strong in December, it slowed notably throughout 2023 to a monthly average of 165,000 in Q4 from 312,000 in Q1. However, December’s outperformance will likely make the Fed cautious about how quickly it lowers interest rates.

We expect long-term interest rates (10-year Treasury yields) to decline throughout the year amid slowing economic activity and inflation. This will reinvigorate commercial real estate investment activity in the second half of the year. Leasing activity should remain relatively resilient, although various factors will likely keep occupiers somewhat cautious in 2024.