A slowdown in job creation, particularly among young adults, is weighing on multifamily housing demand, though the impact is likely temporary, according to John Chang, chief intelligence and analytics officer at Marcus & Millichap.
Chang noted that while apartment absorption has softened alongside weaker hiring conditions, other commercial real estate sectors have remained largely stable and an eventual rebound in employment could quickly release a wave of delayed housing demand.
The latest data from the Bureau of Labor Statistics reveals a labor market that appears steady on the surface but is losing momentum beneath it. Employers added 178,000 jobs in March, the strongest monthly gain since late 2024, yet the broader trend points to a significant slowdown. Over the past year, job gains have averaged just 22,000 per month, down sharply from about 122,000 in 2024 and roughly 210,000 in 2023.
Gains have become increasingly concentrated in healthcare, while other sectors have contributed only modestly. Even so, the unemployment rate has remained at 4.3%, supported in part by declining labor force participation.
That participation trend is where the labor market softening is most visible, particularly among younger workers. Overall, labor force participation fell to 61.9%, with the steepest decline coming from adults ages 20 to 24. This pullback plays a key role in slower household formation as more young adults are living at home longer than in prior cycles. Chang noted that this shift effectively delays the transition from family households to renter households, creating a drag on apartment absorption even without a sharp rise in unemployment.
That dynamic became especially apparent in multifamily performance during 2025. After a strong start to the year, demand weakened sharply in the second half. Net absorption averaged roughly 191,000 units per quarter in the first half, then fell to just 35,000 units in the third quarter before turning negative in the fourth, with a loss of 40,000 units.
Outside of multifamily, the slower hiring environment has had a more muted impact. Office markets have recorded positive absorption for seven consecutive quarters through the end of 2025, led by primary and suburban markets, with Class A space capturing the majority of demand. Retail and industrial fundamentals have also remained broadly steady, though both were intermittently affected by tariff-related volatility that briefly distorted absorption trends, according to Chang.
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