Job growth is one of the most important metrics to consider when analyzing a market. But how skewed are the numbers today? I get jobs growth data from the Bureau of Labor Statistics web site, and they get it through surveys, mostly business surveys. They are considered estimates and can be revised for the prior 2-3 months.
I track these numbers closely because, like every real estate investor, I want to be investing where jobs are growing. That’s what attracts new tenants to an area.
Job growth was strong over the few years prior to the pandemic, then fell off a cliff when the pandemic started, April, 2020. Losses over 10% were not uncommon, and they persisted through much of 2020. Then in early 2021 job loss stabilized and started growing again.
So how are you measuring jobs with this kind of volatility? Like in 2008, are you assuming that if the economy was strong before that crisis, it will be strong again? Not a good assumption because population growth and migration shifted in the ensuing years. The same is happening now that the pandemic is winding down, perhaps even more so.
From what I see in the jobs numbers, a reasonable level of stability emerged midway into 2021. Month to month changes were no longer huge swings. We saw companies hiring again, although they were struggling to. There were still substantial financial subsidies in the form of stimulus and pandemic relief, which may have relieved some from re-entering the job world but most businesses had reopened.
That means that we are now seeing reliable job growth numbers reflected in the BLS surveys. When I see job growth of 3% in a market I can get excited again, knowing it’s not just bouncing back from the big drop. Likewise if it’s 1%, 0, or negative, that is an area to avoid as it could very likely be a longer term trend.