As 2025 unfolded, the labor market quietly shifted from a source of strength to one of the economy’s main pressure points. Job growth slowed sharply, with the economy adding just 584,000 jobs. That marked the weakest annual gain since 2003, excluding the recessionary years of 2008, 2009 and 2020. The 2025 slowdown became more pronounced toward year-end. During the final three months of 2025, payrolls declined by 67,000 jobs, something not seen since the period following the financial crisis.
This weakness was not evenly distributed across the year. The first half of 2025 initially appeared relatively healthy, as nearly 90% of the year’s total job gains were recorded between January and May. That momentum faded in the second half. After modest job losses in June, the economy added fewer than 90,000 jobs from July through December, making it the weakest second half for employment growth since 2009.
Wage growth moderated alongside slower hiring but remained supportive of household incomes. In 4th quarter, average hourly earnings for private sector workers rose 3.7% from a year earlier. For all of 2025, wages increased 3.8%, down slightly from 2024. Consumer price inflation stood at 2.7% in November, above the spring low but below the pace seen at the start of the year. With inflation easing and the labor market weakening more than expected, the Federal Reserve shifted toward supporting growth. Policymakers delivered three quarter point rate cuts in 2025, including two in the final quarter, bringing the federal funds rate to a range of 3.50% to 3.75% by year end.
Against this backdrop, our apartment market outlook has been revised lower. At the national level, effective rents are now expected to grow about 1.9%, following a nearly 60-basis-point decline in 2025. Among the top 50 markets, only about 8% are expected to achieve growth in the 3% range in 2026, led by Miami. More than half of large markets are forecasted to post growth in the 2% range, while roughly a quarter are expected to see gains in the 1% range. Four markets are projected to see rent growth below 1%, and an equal number are expected to experience rent declines in 2026, with Denver facing the steepest drop.
On the supply side, approximately 316,000 units are projected to deliver nationwide in 2026, down nearly a quarter from 2025. Roughly 85% of that supply will be concentrated in the top 50 markets. Dallas and Newark are expected to lead with about 18,000 units each, followed by Phoenix, New York and Los Angeles. In relative terms, Charlotte is expected to see the fastest inventory growth, with existing stock expanding by about 4.5%.
