Markets Where Job Gain is 5x Multifamily Supply - RAOT Week of October 27th 2024

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

Top Metros for Job Growth

Last week, the Bureau of Labor Statistics (BLS) released its monthly report on metro-level job growth. It is one of the most important indicators of multifamily demand because new jobs tend to create new households, and a portion of them will move into apartments. 

On a seasonally adjusted basis, New York and Los Angeles added 164,000 and 91,000 jobs in the last year, respectively. Dallas, Houston, and Miami were next on the list, adding between 56,000 and 79,000 jobs in the past 12 months.

Charleston’s annual job growth of 3.7% was the strongest relative change out of the 45 markets published by Radix. Wilmington and San Antonio each had annual job growth of 2.6%. 

Based on the report, Minneapolis and Portland have lost approximately 5,500 and 8,000 jobs, respectively, but Radix data indicates demand for apartments has remained strong. Both have positive annual rent growth and occupancy rates above 94.4%. It will be worth watching whether the numbers are ultimately revised.  

Job Creation Compared to New Supply 

To put jobs data into context, real estate economists will often compare the number of jobs created in a market relative to the of new housing units being constructed.

As of the latest estimates, New York, Los Angeles, and Charleston have created approximately five times as many jobs in the last year compared to the number of new multifamily units delivered. 

While each metro area has a different long-term average for the number due to a variety of factors, a five-to-one ratio is considered very favorable for operators to absorb the new supply delivered to the market. 

Markets such as Phoenix, Atlanta, and Raleigh are only adding approximately two jobs compared to each new apartment unit delivered, suggesting that operations will be more challenging. Factoring in single-family construction in those markets further dilutes the demand.

As new supply slows, those ratios will improve if the labor market remains steady.

Final Jobs Report before U.S. Presidential Election

The national jobs report for October will be released by the BLS this Friday, November 1. It will be delivered just days before the presidential election, and it could have mixed signals on the strength of the labor market due to recent events. 

For its “First Friday” report on the national labor market, the BLS surveys employers based on the pay period that includes the 12th of the month. It’s worth noting that hurricanes Helene and Milton made landfall on September 26 and October 10, respectively. Unemployment insurance claims spiked in states affected by the hurricanes during the first half of October. 

As an example, North Carolina reported 11,655 initial unemployment insurance claims the week ending October 5, and another 9,290 initial claims for the week of the 12th. A year earlier it was closer to 3,600 claims per week. In just that one state, more than 13,000 people lost their jobs in a two week span compared to more normal period. 

Additionally, roughly 33,000 machinists at Boeing have been on strike since September 14. Those are some of the factors that could lead to a more pessimistic report after the very strong reading of 254,000 jobs created the previous month. 

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

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