Job Growth Beats Expectations, Boosts Apartment Demand - RAOT Week of Oct 6th 2024

This is a narration of our weekly Rent and Operating Trends Report.

Jobs Report Much Stronger Than Expectations

The U.S. economy added 254,000 jobs in September according to the Bureau of Labor Statistics(BLS), which was roughly 100,000 more jobs than expected. Additionally, the preliminary results for July and August were revised upward by a combined 72,000 jobs, suggesting the labor market remains strong. 

Job growth is one of the most important factors to multifamily demand because it helps spur new household formation. Combined with declining supply levels in many locations, multifamily fundamentals are trending in the right direction for more balanced operational results in 2025. 

While the numbers released last week are favorable, recent labor market reports have faced much criticism related to their accuracy due to repeated downward revisions in subsequent publications. That said, current multifamily rent growth and occupancy rates suggest supply and demand have found equilibrium in many markets. 

Wages are Up and Unemployment is Down

The BLS also reported average annual wage growth in the U.S. increased to 4.0% in September. It had decelerated to 3.6% in July before increasing the past two months. Based on Radix data, the last time national rent growth exceeded wage growth was in September 2022. 

The unemployment rate decreased slightly to 4.1%. The trend suggested many people impacted by layoffs have been able to find new work, but hiring remained very concentrated in just a handful of industries. Approximately 73% of new jobs created in September were in healthcare, social assistance, government, construction, restaurants, and bars. Job seekers in other industries likely feel like the labor market is weaker than headline reports.

Goldman Sachs Lowers the Probability of a Recession

According to a report by CNBC, Goldman Sachs has lowered the chance of a near-term recession to 15%. To put it into perspective, that number is considered the baseline probability for any “normal” period. 

Last week’s strong labor market report was noted as one of the factors playing a role in the optimistic outlook. Other positive economic news during the last month included lower growth in inflation, better-than-expected consumer spending, and the Fed lowering interest rates.

Multifamily Highlights

Operational performance in the first week of October showed no material differences than prior weeks, outside of typical seasonal slowing. Traffic and occupancy rates remained down from last year, but the week-to-week changes were minor. Annual rent growth remained negative at -0.5% at the U.S. level. 

Steady job growth should result in a typical fourth quarter for performance for multifamily, especially in markets where supply is slowing. If that happens, more markets will show positive rent growth and improved occupancy rates in 2025.

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Explore our webpage for more insights and resources:
https://bit.ly/Radix_Website