More Americans are working now than in March 2020, right before the pandemic—4 million more. But job gains in recent months have been sluggish, potentially signaling that a job-cutting recession may occur in 2024. The unemployment rate is still low at under 4%. Nonetheless, what is more critical for commercial real estate is how many Americans are working and receiving paychecks—and where they are working.
The office market is the only commercial sector to witness continuous negative net absorption at a time of job additions, and the end of the down cycle is not yet over. Through the first half of 2023, an additional 35 million square feet became vacant. More worrisome is that the positive absorptions in both retail and industrial were only about half of what they were in the first half of 2022.
The high interest rates are slowly breaking the economy. The Fed has to stop raising rates and consider a new strategy: cutting rates. After all, inflation is trending lower and will be in the comfort zone by early 2024.