New labor market analysis from Marcus & Millichap indicates that the U.S. economy may now need to generate fewer than 50,000 jobs per month to keep unemployment steady, down from the earlier benchmark of roughly 100,000 jobs. The firm attributes the shift to demographic aging, higher worker productivity and reduced immigration, which together are changing how job growth translates into labor market tightness.
Recent employment data underscore the moderation in hiring. The economy added 29,000 jobs in September, and downward revisions to July and August erased another 60,000 positions that were previously reported. Year-to-date, payrolls have expanded by 612,000 jobs. Moody’s projects total gains of 735,000 for full-year 2026 and 645,000 in 2027, pointing to a slower but still positive job creation path.
Despite softer hiring, the unemployment rate has held in the low-4% range. Retirements and lower net immigration are constraining labor force growth, helping keep joblessness in check even as monthly gains pull back. Economist Gad Levanon notes that real productivity in professional and business services has climbed 16% compared with 2019 levels, reinforcing Marcus & Millichap’s view that fewer net new positions are now required to maintain labor market equilibrium.
These labor dynamics are feeding directly into commercial real estate performance, with varied effects by property type. In multifamily, weaker employment growth is slowing household formation and reducing net absorption, while also dampening work-related migration. The report points to Sun Belt markets as especially exposed, where elevated new supply is intersecting with moderating demand, adding pressure to lease-up and rent growth trajectories.
Retail fundamentals are being shaped by a different set of forces. Consumer spending remains resilient, with retail sales rising 6% year over year through August, or about 2.5% after inflation. However, this spending strength has not translated into proportional demand for physical store space. Since early 2025, retail net absorption has averaged less than 2 million square feet per quarter, compared with more than 6 million square feet per quarter in 2024 and 12 million square feet per quarter in 2019.
Industrial demand is being influenced by ongoing growth in e-commerce and by tariff-related shifts in inventory strategies, which are reshaping how users plan and occupy logistics space. In the office sector, office-using employment has fallen by nearly 325,000 positions over the past two years, yet the segment has recently moved back into positive absorption as return-to-office patterns lend support to occupancy.
Marcus & Millichap concludes that job creation is providing less direct support for new space absorption across sectors. The firm notes that near-term revenue growth will rely more heavily on operational efficiency, economies of scale, value creation initiatives and expense control. At the same time, a pullback in new construction activity, combined with continued though slower payroll growth, could help underpin property performance over time, benefiting investors and owners who are positioned for this evolving demand environment.
