Marcus & Millichap expects the pace of job growth to step back in 2025 due to a continued elevated interest rate climate dampening business expansion.
Although the Fed began reducing rates in September, current expectations call for only two additional rate cuts in 2025, with the overnight rate expected to drop to 3.75%, said Marcus & Millichap SVP and national director of research and advisory services, John Chang. The overnight rate had been expected to drop into the low 3% range just a few months ago.
“Expectations have shifted significantly since October,” said Chang. “Basically, the Fed is being very cautious about inflation risk.”
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In addition to the impacts of Fed policy, there has been a disconnect between the overnight rate and long-term interest rates, noted Chang. The 10-year Treasury has bumped up to the 4.7% range, its highest rate since April 2024. Clarity on policies tied to the incoming Trump administration could help balance the disconnect, but sustained elevated interest rates are likely to slow the pace of job creation, he said
Not all markets will be impacted the same way, however. The five adding the most jobs in 2025 will be Dallas/Fort Worth, Houston, New York, Washington, D.C., and Atlanta, according to a Marcus & Millichap employment forecast.
“That's not a huge surprise,” said Chang. “Those are five of the largest employment markets in the country, so it makes sense for them to add the most jobs. But what I find more interesting, from a commercial real estate investment standpoint, are the markets with the biggest percentage increase in employment.”
Those markets include Houston, which is expected to post 2% employment growth with the addition of 68,000 jobs. The market benefits from the announcement that Chevron is moving its headquarters to the market as well as the growth of the Port of Houston and Texas Medical Center.
Austin continues to be a top employment growth market, which has been a magnet for developers for the past several years, said Chang. Job growth in the market has dovetailed with out-sized CRE development, which has kept CRE supply and demand roughly balanced, he said.
Southeast Florida has been growing at an exceptionally rapid pace for several years, which has made Fort Lauderdale a top market for employment growth. Disney is expanding its cruise line presence in the market and the Broward County Convention Center is expanding, which should support continued growth in tourism, said Chang.
Jacksonville, Florida, is expected to see 2.2% in employment growth this year, which is about double the national pace. Boeing and DHL are expanding their footprints in the market.
The fastest-growing employment market for 2025 on Marcus & Millichap’s list is Raleigh/Durham/Chapel Hill, North Carolina, where employment is expected to grow by 2.6%.
“The highly educated populace in this area, where about 45% of the population have a bachelor's degree, continues to draw businesses, including Apple, which is currently building a new campus in the area,” said Chang.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
