Intelligent Investment

Economic Watch: With Strong November Job Growth, Fed Likely Stays on Hold

December 8, 2023 3 Minute Read

Looking down on a city.

Executive Summary

  • The U.S. added 199,000 jobs in November, exceeding consensus expectations of 190,000. Job growth in September was revised down by 35,000.
  • November job gains were concentrated in health care and government, while the manufacturing sector had a boost from an end to the auto workers strike. Retail trade and professional & business services had the most job losses in November.
  • The unemployment rate fell to 3.7% from 3.9%, while the labor force participation rate rose slightly to 62.8%. Average hourly earnings growth stayed strong, up by 4.0% year-over-year.
  • The labor market remains tight but job and wage growth have slowed from earlier this year. This supports our view that the Fed will not raise rates at its final meeting of the year next week.
  • The 10-year Treasury yield rose this morning on the jobs report and remains around 4.2%. Despite the rapid fall over the past month, long-term borrowing rates remain high. We therefore do not expect a broad capital markets recovery until the second half of next year.

Impacts on Commercial Real Estate


Office-using jobs fell by 5,000 in November, with professional & business services losing 9,000 and financial activities gaining 4,000. Corporate cost cutting and structural changes in office usage will continue to be a near-term headwind for office demand.


The transportation & warehousing sector lost 5,000 jobs last month, while manufacturing gained 28,000. The significant increase in manufacturing jobs was due to striking auto workers returning to work. Despite increasing headwinds, industrial real estate fundamentals have remained relatively strong, with 2023 on pace to be the third best year ever for leasing activity.


Traditional retail lost 38,400 jobs in November, while food services & drinking places added 38,300. While retail real estate fundamentals remain strong, we expect that lagged impacts of interest rate hikes and the restart of student loan payments will reduce consumer spending and demand for retail space.


The construction sector added 2,000 jobs in November, with gains in specialty trade contractors and civil engineering. Non-residential building construction lost 1,100 jobs and residential construction lost 1,700. The construction industry has not been hit as hard by higher interest rates than in prior cycles, in part due to a housing shortage and certain government subsidies for infrastructure and manufacturing.

Health Care

Health care gained 76,800 jobs in November. Ambulatory health care (outpatient services) added 35,800, while hospitals gained 23,700 and nursing & residential care 17,300. We expect that demand for health-care properties will remain strong in the long term due to an aging population.


Accommodation services added 1,100 jobs in November. The hotel sector continues to benefit from increased travel demand, but leisure spending will slow as consumer spending weakens.


Multifamily is expected to remain resilient thanks to high mortgage costs making renting more favorable. A resilient labor market also provides a tailwind, but slower job growth may reduce household formation in the near term.

The Bottom Line

With inflation trending down, it’s unlikely that the Fed will hike rates further. While November marked the 35th consecutive month of job growth, there are areas of weakness in the labor market. Nevertheless, unemployment remains low at 3.7% and wage growth is strong. This, coupled with above-trend inflation, means that the Fed is unlikely to cut rates until the economy has cooled sufficiently to keep inflation in check.

The 10-year Treasury yield has fallen by approximately 80 basis points from October highs. While this has boosted capital markets sentiment, further volatility in the bond market is likely if the economy continues to stay resilient. For this reason, we continue to believe that investment sales will not recover until the second half of 2024. Leasing activity could improve if the economy stays resilient, but structural changes in work patterns will continue to limit demand for office space.