Taking a step back from the multifamily market, let’s take a look at what nearly all tenants need to occupy an apartment unit – a job. The good news is the U.S. economy has experienced monthly growth in nonfarm payrolls for 48 consecutive months. For the purpose of this piece, MPF Research looked at the current employment levels among the core 100 U.S. metros relative to their pre-recession levels to get a sense for the underlying strength of the economic recovery. Five years after the recession officially ended, most metros have returned to pre-recession employment levels. In that vein, the improvement in the labor market can be best described as slow and steady. The chart below illustrates the prolonged recovery, but more importantly depicts the consistent upward trend in the number of metros moving above pre-recession employment levels.
Source: Bureau of Labor Statistics, MPF Research
Clearly not all metros have recovered to the same degree. The second chart identifies the clear winners and losers in the post-recession world. Not surprisingly, the major Texas markets have been net winners, due in part to major corporate expansions and relocations. Looking deeper, the metros that have recovered generally have larger employment concentrations in the energy and technology industries. On the flip side, metros struggling to recapture previous employment levels either got hit hard by the housing crisis or lack significant economic growth drivers.
Where do we go from here? The Kansas City Fed Labor Market Conditions Indicators (LMCI), which tracks 24 labor market variables, continues to show broad based strength. In fact, based on the October 8, 2014 release, 18 of the 24 variables made a positive contribution in their activity indicator and positive momentum remains near historically high levels. The Kansas City Federal Reserve’s analysis suggest labor market conditions will continue to improve slowly but steadily.
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