Intelligent Investment

Economic Watch: Tight Labor Market, COVID Headwinds Limit September Job Growth

October 8, 2021 3 Minute Read

Executive Summary

  • U.S. job creation in September slowed to its lowest monthly level this year as 194,000 jobs were created—well below expectations of 500,000.
  • COVID and a labor shortage largely curtailed September job growth. Notably, education employment decreased sharply (down 144,000 at the local level and 17,000 at the state level).
  • Leisure & hospitality employment grew by 74,000, the most of any sector during the month.
  • The labor participation rate fell slightly to 61.6%, contributing to a 40-basis-point decrease in the unemployment rate to 4.8%. Average hourly earnings increased by 0.6% in September and by 4.6% from a year ago.
  • Job growth in July and August was revised upward by 169,000. The bulk of these revisions (131,000) were in August.
  • Investor reaction to the September jobs report was subdued, with the 10-year Treasury yield and equity markets showing minimal volatility.
  • Although September job creation was well below expectations, we expect the Fed to move forward with its reduction of asset purchases in November.


Office-using jobs increased by 62,000 in September. Professional & business services gained 60,000 and financial activities added 2,000. Employment gains in office-using sectors will support office demand as concerns over COVID wane amid lower infections, vaccine availability across most age groups and powerful new therapeutics.


The warehousing & storage sector gained 15,600 jobs in September and manufacturing added 26,000. This maintains a favorable outlook for industrial & logistics properties amid strong consumer demand and elevated e-commerce sales.


Traditional retail gained 56,100 jobs in September, while food services & drinking places increased by 29,000. The retail sector’s outlook is improving as COVID infection levels continue to decrease.


The construction sector gained 22,000 jobs in September. Nevertheless, the sector will continue to face difficulties over the near term amid disrupted supply chains. Over the longer term, demographics and low interest rates bode well for the sector’s outlook over the next several years.

Health Care

Health care lost 17,500 jobs in September. Ambulatory health care (outpatient services) gained 28,200, while hospitals lost 8,100 and nursing & residential care employment declined by 37,600. While COVID has varied impacts on the sector, demographic trends and other long-term drivers of health-care-related real estate support a stronger outlook.


Accommodation services gained 2,100 jobs in September. CBRE expects an uneven recovery for the hotel industry, with leisure travel remaining stronger than business travel over the near term. Nevertheless, the outlook is improving as vaccines are expected to be approved for children, new therapeutics become available and infection levels decline.


Continued job growth and higher wages will support household formation and ability to pay rent. As activity recovers in large cities, we expect urban markets to benefit from these demand drivers.

The Bottom Line

The U.S. added 194,000 jobs in September, well below expectations of 500,000. However, the relatively low headline number has caveats. First, local government education was the weakest sector for hiring. Normally, September is a strong month for education employment as reopening school districts bring on bus drivers, substitute teachers and other staff. This year’s difficulty in hiring education workers reflects concerns over COVID infection. Second, the household employment survey is much closer to consensus expectations, likely auguring upward revisions to September’s job growth in coming months. As such, we expect the Fed to begin reducing its asset purchases.

Looking ahead, we expect COVID’s impact on the economy to wane. This should support additional workforce participation, continued employment growth and the ongoing real estate recovery.