Surge in Virus Outbreak Cuts into Employment in Hard-Hit Leisure & Hospitality Sector
|U.S. nonfarm payrolls fell by 140,000 jobs last month, ending a streak of seven consecutive months of net positive job creation. The decline is minimal relative to the more than 12.0 million jobs added since April 2020, but underscores the growing headwinds facing the recovery when employment remains down 9.8 million jobs relative to pre-pandemic figures.
The ongoing surge in the coronavirus outbreak and related business restrictions is likely interlinked with the setback in payrolls. The leisure and hospitality sector, which has proven vulnerable to the pandemic due to the need for frequent in-person interaction, recorded 498,000 job losses. Food services and drinking establishments suffered most heavily, but the amusement and recreation and accommodations subsectors also experienced declines.
In contrast, most other sectors of the economy saw payrolls grow last month. Trade, transportation, and utilities led the way with 191,000 net new jobs, followed by professional and businesses services with 161,000 jobs added. Retail trade registered the third most job gains as the industry likely benefited from holiday shopping.
A silver lining in the jobs report is the deceleration of permanent job losses, which declined by 348,000. Temporary furloughs increased month over month by 277,000. Moving forward, it is possible that many of last month’s job losses in leisure and hospitality could be recouped quickly if virus transmission can be contained before businesses permanently close their doors
Monthly and Year-on-Year Change in Jobs by Industry (in Thousands)
Single-Family Rental Construction Accelerating as Home Prices Rise
|Single-family rental companies are starting to turn to new construction to expand their portfolios as home prices push higher in markets across the country. More than 50,000 homes were built as rentals during the 12 months that ended on Sep. 30th, compared to a long-run annual average of 31,000, according to John Burns Consulting. Rentals account for approximately 5-6% of all single-family home completions.
Investors in single-family rentals have typically focused on existing homes, but with the median home price up 14.6% YOY both institutional and mom-and-pop investors are finding fewer opportunities to acquire potential rentals at an attractive basis. Some of the largest players in the space have begun partnering with major home builders to construct subdivisions of single-family rentals.
On the resident side, high prices have put ownership out of reach for many who would prefer single-family homes despite record-low mortgage rates. As a result, many would-be buyers have opted to rent, which has boosted the single-family rental market through the pandemic. The median rent for single-family homes is up 3.4% YOY to $1,729, while the occupancy rate has risen modestly to 97%.
Secondary Multifamily Markets Dominate List of Top Performers in 2020
|Several secondary markets achieved rent growth in excess of 4.0% last year despite pandemic-induced disruptions to leasing. Most of these markets with strong outperformance are located in the Western and Southern regions. Riverside led top 50 markets with rents up 10.2% YOY, followed by Sacramento with 7.2% YOY rent growth.
All of the top performers for rent growth benefited from an advantageous supply-demand balance that pushed occupancy rates higher. Some markets experienced a muted pace of deliveries during 2020 that came in well below the national average, such as Memphis, Detroit, and Providence. Meanwhile, other markets saw an uptick in multifamily demand originating outside the home market. Phoenix, for example, proved successful last year in attracting renters relocating from the West Coast.
Many of the markets with the strongest rent figures during 2020 have also benefited from relying on economic engines that have proven resilient to coronavirus-related turbulence. Riverside and Memphis are both home to major transportation and warehousing hubs that profited from a jump in online spending last year, and Sacramento and Virginia Beach both have a large government employment base.
Top Performing Major Multifamily Markets for Year-on-Year Rent Growth
The Weekly Briefing - January 11th, 2021
The Weekly Briefing – January 11th, 2021
In This Week’s Brief:
- Surge in Virus Outbreak Cuts into Employment in Hard-Hit Leisure & Hospitality Sector
- Single-Family Rental Construction Accelerating as Home Prices Rise
- Secondary Multifamily Markets Dominate List of Top Performers in 2020