Will The Fed Cut?

The Real Estate Espresso Podcast

Will The Fed Cut?

Spotify Google Podcast Apple Podcast Subscribe via RSS Leave a Review

Welcome to the Real Estate Espresso broadcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce. On today’s show, we’re talking about the signs of economic weakness in the US.

In recent weeks, a number of macroeconomic indicators and market signals have begun flashing warning signs for the US economy. Now, none of that is screaming “crash” yet, but it definitely shows slowing momentum. It’s enough that many investors and central bank watchers are expecting an upcoming policy shift at this month’s Federal Open Market Committee meeting.

A lot of the data is depending on private data because, quite frankly, there simply wasn’t enough information during the government shutdown. According to recent labor market reports, the economy lost 32,000 private sector jobs in November. That’s a surprising downward number versus the expected gains. That marks the third jobs decline in four months, signaling a broader slowdown in hiring.

Meanwhile, as of mid-2025, monthly job additions have slowed significantly compared to 2024, from an average of 168,000 a month in 2024 to roughly 74,000 a month in 2025. Now, of course, that does not even take into account all of the downward revisions that have been published to make up for past mistakes.

The cooling of the labor market also shows up in regional reports. In roughly half of the 12 districts monitored by the Federal Reserve, employment conditions have weakened. So taken together, these signs suggest job market strength, long considered a pillar of post-pandemic recovery, is definitely fading.

Slowing hiring, rising layoffs, and softer wage pressure erodes households’ income, and it definitely erodes consumer confidence over time. Now, if you add to that jitters around the stock market, a lot of the economy is being driven by the top 20% of households, so it’s definitely a lot of consumer pressure. There’s a slowing job growth. There’s reduced hiring, and it is absolutely taking a toll on consumer sentiment.

According to a recent survey by the New York Federal Reserve, more US households report concerns about their finances and future credit, another signal of economic weakness.

Now, if we put aside artificial intelligence, there is shrinking business investment. AI investment accounts for almost 2% of GDP right now. If you were to back that out, the US would be solidly in recession territory. We’ve had residential investment—both construction and homebuilding—decline for consecutive quarters. That implies not only a housing market slowdown, but fewer jobs and less spending in construction.

We’ve seen the major national homebuilders offering up to 13% of the price of a home in incentives. Industrial production and manufacturing indicators have weakened as well. That’s reflecting softer demand and potentially inventory drawdowns. Business investment and overall capacity expansion are also under pressure.

All of this combination—a weaker investment climate, slowing manufacturing, cooling housing—points to a drop in underlying economics.

Beyond the hard data, the sentiment indicators are also hinting at rising caution. Many households are reporting weaker financial outlooks. Credit availability and consumer leverage concerns are growing as inflation, lingering debt, and tighter credit terms weigh on consumer finances.

On the business side, uncertainty about demand, global supply chain tensions, tariffs, policy shifts are contributing to a retrenchment in investment.

When we look at all this together, the pressure on the Federal Reserve to respond is definitely rising. A recent survey of economists showed 80 percent expect the Fed to cut its benchmark rate by 25 basis points at the meeting. A couple of other reports—one that I saw at Bloomberg—put that at 87 percent.

Observers at major institutions believe the weakness in the labor market appears real, and it’s not just a data aberration. Even though inflation remains above the central bank’s 2 percent target, the combination of softer labor and weakening demand argues for a recalibration of the policy.

So what does this mean for investors? If the Fed does follow through with the rate cut in December, the ripple effect will reach multiple corners of the economy. Mortgage rates might not fall in lockstep, as we’ve seen before, but lower short-term rates and improved sentiment could gradually restore demand in housing markets.

Real estate investors, especially multifamily, commercial, and value-add redevelopment, may find refinancing conditions a little bit easier, creating opportunities to reposition assets or acquire underperforming properties.

Slower growth and tighter labor markets might depress demand over the next six to twelve months. That could challenge retail-oriented real estate and consumer discretionary commercial real estate. More broadly, the equity and credit markets may respond favorably to easier monetary policy.

Now, right now the US is walking a bit of an economic tightrope. If growth continues to stall, the next few months could look more like stabilization than a rebound, and in that context the December rate cut by the Fed seems not only plausible, but actually quite probable.

The US federal government is out of tools on the fiscal side. Congress is not going to allow lavish spending, and so the only tools left are, in fact, in terms of monetary policy.

Now, for investors and developers, that means it might be a good time to stress-test portfolios, especially income-dependent real estate. It also represents opportunity. Lower rates, less competition, and a little bit more capital-efficient acquisition windows—that could favor disciplined, long-term investors to pick up some real value.

As you think about that, have an awesome rest of your day. Go make some great things happen, and I’ll talk to you again tomorrow.

Stay connected and discover more about my work in real estate and by visiting and following me on various platforms: