- US employers added 147,000 jobs in June, surpassing expectations, but most gains were concentrated in state government and healthcare—sectors that contribute little to office leasing demand.
- White-collar industries saw job losses, a troubling sign for commercial real estate, particularly office landlords already under pressure.
- Excluding government and education jobs, private sector hiring rose by just 84,000, while ADP data showed a 33,000-job decline in private payrolls.
- Young workers, especially recent college graduates, are struggling to enter the labor market, dampening household formation and broader economic activity.
Slower Growth Beneath the Surface
At first glance, June’s employment data looked like good news for the US economy, per GlobeSt. Job gains of 147,000 exceeded forecasts by over 30,000, and the unemployment rate dipped to 4.1%, better than the 4.3% expected by economists. But for commercial real estate professionals, particularly those in the office sector, the report offers more concern than comfort, as white-collar employment continued to weaken beneath the surface.
The bulk of the new jobs came from healthcare and state government—fields that don’t typically translate into increased demand for traditional office space. When government and education hiring are removed, net job creation drops to 84,000, underscoring the private sector’s continued weakness.
Office Demand in Jeopardy
June marked a continuation of the troubling trend of white-collar job losses. According to the Bureau of Labor Statistics and analysis from Comerica Bank, job cuts were concentrated in professional and business services—key tenants in office buildings. Federal government employment also fell by 7,000 jobs, adding to the downward pressure on leasing demand.
Hiring in major private-sector industries, from construction to information and financial services, was largely stagnant. ADP’s private payrolls data even recorded a net loss of 33,000 jobs.
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Labor Market Pain Hits Young Workers
Younger Americans are among those feeling the impact most acutely. The Federal Reserve Bank of New York reports that people aged 22 to 27 are experiencing higher unemployment and slower career starts, delaying milestones like household formation—a key driver of residential and mixed-use CRE demand.
Recent graduates are particularly hard-hit: in March 2025, their unemployment rate was 5.8%, compared to just 2.7% for all college graduates. That gap has widened since the pandemic, indicating a long-term labor market shift with implications for housing, retail, and office sectors.
Signals of Fragility
Despite some optimism in top-line numbers, labor market data reveals early warning signs. Job postings in June dropped 7% month-over-month and 2% year-over-year, while discouraged and marginally attached workers rose sharply.
According to ManpowerGroup’s Becky Frankiewicz, “June marked the weakest hiring month of the year,” even as headline job figures suggested strength. Real-time labor data shows employers pulling back, reinforcing concerns of a cooling economy.
Why It Matters for CRE
Persistent white-collar job losses and flat private sector hiring directly impact the demand for office space and urban commercial real estate. As employment growth shifts toward sectors with minimal office needs, CRE planners face mounting uncertainty. Without a rebound in professional job creation, office leasing—and by extension, valuations—could remain under pressure for the foreseeable future.
What’s Next
With economic headwinds from global conflict, policy instability, and trade tariffs still in play, analysts warn that job growth could remain uneven in the second half of 2025. For commercial real estate stakeholders, especially in the office sector, cautious optimism may need to give way to contingency planning.
