Job Growth No Longer Chief Predictor of Apartment Rent Growth

Job growth is generally seen as the primary driver of apartment fundamentals, particularly rent growth and demand. While that has been the case in the past, job gains are no longer the gold standard for predicting apartment rent growth.

Throughout the 2010s-decade, cumulative job growth (as a ratio of gains) positively correlated with cumulative rent growth. In other words, the more jobs a market added, the more apartment rents subsequently grew in that market.

Fast forward to the 2020s decade and that correlation is less strong. Job gains now have a less direct relationship with apartment rent growth, compared to previous cycles. Since 2020, job growth as a predictor of rent growth has been far less effective. There’s a bit of positive trendline that indicates job growth translates to some rent growth, but the slope of that line is far less steep. And equally important, the relationship between the two variables isn’t much more than random.

In a post-pandemic world where employees – especially highly educated, high earning employees – are more likely to work remotely, a given market’s job gains might be irrelevant to where those employees choose to live. Additionally, job gains have been more heavily concentrated in lower and middle earning sectors, such as Education and Health Services, Government and Leisure and Hospitality (the lowest wage sectors, as tracked by the Bureau of Labor Statistics).

Sectors such as Education and Government tend to be lower risk and more recession-proof, but also lack the earning power seen in other white-collar sectors such as Information (where most tech jobs are housed), Financial Activities and Professional and Business Services.

Still, job growth is a generally strong indicator of overall economic health.

[Related: Why is 2025 Likely to Have Strong Apartment Demand if Job Growth Has Slowed?]