January 2017 Jobs Report

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Market Reporting that Matters

January 2017 Jobs Report

Job Gains Outperform Expectations

Thursday, February 9, 2017

January job gains exceeded even the most optimistic economists. The initial estimate from the U.S. Bureau of Labor Statistics (BLS) indicated that total nonfarm payroll employment increased by 227,000 jobs, as the unemployment rate inched up to 4.8%. January’s job gains were well above the consensus forecasts by almost a third.

IN THIS ISSUE

More Top Job-Gain Metros Record Slower Growth 

Slowing Job Growth is Reducing Rent Growth 

By the Numbers

November’s job-gain figure of 204,000 was revised down to 164,000, while December’s was revised up from 156,000 to 157,000 -- a net decrease of 39,000 jobs during the previous two months. January’s monthly number was the highest monthly rate since September 2016 and was well above the average monthly gain in 2016 of 187,000.

Annual job growth remained moderate, staying at 1.6% but down from 1.9% in January 2016. Annual job gains were 2.343 million, 262,000 less than January 2016’s total but an improvement of 101,000 from last month’s annual rate.

Employment Snapshot Stats

Average hourly earnings (wages) for privately-employed workers continue to be a highlight in the BLS’ release, increasing to 2.5% on an annual basis in January, a slight decrease from December’s 2.9%.

The headline unemployment rate ticked up again to 4.8% in January, according to the Current Population Survey. The civilian labor force participation rate increased by 20 basis points (bps) to 62.9%, thanks to an increase in the number of unemployed people looking for work. The employment-population ratio also increased by 20 bps, to 59.9%.

The number of part-time workers for economic reasons increased by 242,000 from last month but is down by 195,000 from January 2016. The U6 unemployment rate, which includes these part-timers and marginally attached workers, increased 20 bps to 9.4%, but was down 50 bps from last year.

In addition, the number of long-term unemployed (27 weeks or more) increased by 19,000 from December, but was 244,000 lower than January 2016. The number of multiple jobholders increased by 91,000 from January 2016 to 7.4 million, and the number of discouraged workers not in the workforce (532,000) decreased by 91,000 from one year ago.

Industry Focus

The not seasonally adjusted unemployment rate for the oil and gas extraction industry fell to 6.8% in January from 8.1% in 2016. The rate increased in the Construction (+90 bps), Information (+30 bps), Financial Activities (+20 bps), Professional & Business Services (+10 bps) and Leisure & Hospitality (+20 bps) industries. Notable unemployment-rate decreases occurred in the Other Services (-120 bps), Education & Health Services (-50 bps) and Transportation & Utilities (-40 bps) industries.

The Trade, Transportation & Utilities (+44,000) sector dominated all industries in job gains for January. Four other industries gained at least 30,000 jobs: Professional & Business Services (+39,000), Construction (+36,000), Leisure & Hospitality (+34,000) and Financial Activities (+32,000).

 January Job Gains by Industry

  • The Trade, Transportation & Utilities supersector was led by the retail trade sector. The clothing stores subsector added 18,300, while electronics and appliance stores (+7,600), other general merchandise stores (+7,200) and furniture and home furnishing stores (+6,000) experienced strong gains. Transportation and warehousing lost 4,000 jobs in January, but wholesale trade added 3,000.

  • The Professional & Business Services supersector’s gains came primarily from temporary help services (+14.800) and the higher-paying computer systems design and related services subsector (+12,500).

  • Construction hiring bounced back sharply in January. The construction of buildings subsector added 12,900 jobs, while specialty trade contractors added another 16,000.

  • Leisure & Hospitality’s net gain came primarily from 29,900 new jobs in the food services sector, while arts, entertainment and recreation added 9,100 jobs.

  • A strong showing from the Financial Activities supersector was due to gains in the real estate subsector (+10,200). credit intermediation (+8,900) and insurance carriers (+9,000).

  • The Education & Health Services supersector’s healthy gains in health care and social services (+32,100) were offset somewhat by losses in educational services (-8,800) for a net gain of 24,000 jobs in January.

  • The Other Services industry (+16,000) rebounded with gains of 8,300 jobs in the membership associations and organizations subsector and positive contributions from the repair and maintenance (+5,400) and personal and laundry services (+2,300) subsectors.
  • Manufacturing’s 5,000-job gain was entirely in the durable goods sector (+6,000), with transportation equipment (+3,000) and furniture (+2,400) leading the way. Nondurable goods manufacturing lost 1,000 jobs, with food manufacturing’s 3,300 job gain offset by losses in apparel (-2,000) and miscellaneous nondurable goods (-1,400). 
  • Mining & Logging gained 4,000 jobs in January as support activities for mining returned 3,000 jobs to the economy.

  • The Information industry (+3,000) again lost jobs telecommunications (-3,800) but gained in motion picture and sound recording (+3,400), other information services (+1,900) and data processing, hosting, and related services (+1,200).

  • Government (-10,000) lost jobs at the state and local levels, mostly in state government education (-7,400) and local government education (-2,700).

More Top Job-Gain Metros Record Slower Growth

The nine metropolitan areas adding the most jobs in the 12 months ending in December (the latest metro-area figures available) were the same as they were in November, though a few changed positions.

The first six metros remained in the same order: New York, Dallas, Atlanta, Los Angeles, Seattle and Washington, DC. Boston and Orlando switched the Nos. 7 and 8 spots, while Denver remained No. 9. Riverside, CA supplanted St. Louis at No. 10, as the Gateway City fell to No. 12.

Together, the total jobs created in the 12 months ending in December for the top 10 metros were up 1.6% from the annual total in November (629,400 vs. 619,300) but down 6.1% from the 12-month total for December 2015 (629,400 vs. 670,300).

A few metros dropped sharply in the rankings: San Francisco fell from No. 19 to No. 32, Chicago fell to No. 27 from No. 20, and Fort Worth fell from No. 24 to No. 37. Conversely, a few metros moved up in the rankings from last month: Phoenix jumped from No. 31 to No. 18, Las Vegas moved from No. 34 to No. 21, and Nashville rose from No. 28 to No. 22.

Annual job growth slowed in seven of the top 10 markets in November:

  • Los Angeles (-90 bps)
  • Dallas (-63 bps)
  • New York (-53 bps)
  • Riverside (-45 bps)
  • Orlando (-36 bps)
  • Washington, DC (-32 bps)
  • Atlanta (-3 bps)

Job growth was up in:

  • Boston (+111 bps)
  • Seattle (+80 bps)
  • Denver (+56 bps)

Continuing Manufacturing sector losses – more than 8,000 jobs since January 2015 -- returned Tulsa to the bottom-five job gains list. Milwaukee, WI has been hit hard by layoffs at JP Morgan Chase, Northwestern Mutual, Caterpillar and Harley-Davidson, while the closing of the Sikorsky facility in Bridgeport, CT hurt that economy. Syracuse, NY lost jobs in the Leisure & Hospitality, Professional & Business Services and Manufacturing industries. The 2,800 jobs lost in Virginia Beach, VA were from the Manufacturing, Leisure & Hospitality and Other Services sectors, whose losses offset gains in Financial Activities and Construction.

Top and Bottom Job-Gain Metros

Access the latest permit trends tables in Excel format here.

Please contact us if you have any questions.

Jay Denton

Senior Vice President, Analytics

jdenton@axiometrics.com

 

KC Sanjay

Sr. Real Estate Economist

skc@axiometrics.com

 

Chuck Ehmann

Real Estate Economist

cehmann@axiometrics.com


Slowing Job Growth is Reducing Rent Growth

It is well known that job growth creates demand for housing of all types, including apartments. Some of the best performing apartment markets have been metro areas with the strongest job gains. But demand is not the only measure of apartment market performance. Rent growth is another primary indicator of market performance, as it reacts to changes in both demand and supply. The magnitude of rent growth is closely watched by all players in the market, as is job growth

The following table lists the 10 metro areas with the highest annual job gains for December 2014 and their current ranking and job gains for December 2016. The table also lists their corresponding job growth and effective rent growth. The next two columns are the difference in job growth from 2014-2016 in basis points (bps) and the same two-year difference for rent growth.

The final column is the elasticity of rent growth to job growth -- the difference in rent growth divided by the difference in job growth. This measure is an indicator of momentum in rent growth to job growth. The higher the number (positive or negative), the greater the swing in rent growth relative to job growth.

Job Growth, Rent Growth Comparison

All 10 of the listed metros added fewer new jobs in 2016 than they did two years previously. Seven were among the top 10 job gain metros in both 2014 and 2016. Perennial leaders, including New York, Dallas, Atlanta and Los Angeles, are joined by Boston, Denver and Riverside, which continue to be strong job generators. Phoenix and Chicago are producing fewer new jobs in 2016 than they did two years ago, and the well-publicized decline of Houston is evident from its current ranking in Axiometrics’ top 120 metros as well as its weak (but positive) annual job gain total of 14,800 jobs for December 2016.

With reduced job gains, naturally, job growth also fell in each of these metros – some by a lot. Not surprisingly, Houston fell the most, dropping by almost 360 bps, while six of the remaining nine fell by at least 100 bps (averaging -150 bps). Dallas and Boston’s job growth dropped by an average of 54 bps, and the large economy of Los Angeles slipped by only 4 bps despite gaining 500 more jobs in 2016 than 2014.

As you would expect given the high correlation between job growth and effective rent growth, almost all of these top 10 metros experienced reduced rent growth in 2016 compared to 2014. December 2016’s rent growth was negative in New York and Houston, falling more than 500 bps in each. Seven of the eight remaining metros averaged about 320 bps slower rent growth than in 2014, while Riverside’s effective rent growth climbed by 143 bps from 2014.

Turning to the elasticity calculation, we see that Los Angeles’ rent growth dropped by about half while job growth changed little, resulting in an abnormally high outcome. Most metros had an elasticity value between 2-4, indicating a two-to-four-fold change in rents compared to job growth. Phoenix had rents and job growth change at nearly the same amount, while Riverside’s increasing rent growth coupled with a drop in job growth resulted in a negative elasticity value of 0.6. 


 

By the Numbers

The following table shows December 2016 (the latest data available) metropolitan-area job gain and job growth, some grouped by state or region.

Metro Job Gains

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