By Justin Dean
Of the top 20 fastest-growing metros in job growth in the 12 months ending in March, six were in Florida and three each were in Utah and Texas. The top Midwestern metro was Grand Rapids, Mich. (ranking 22nd at 2.9 percent), while the top Northeastern metro was Philadelphia (49th at 2 percent). The U.S. added 2.2 million jobs in the 12-month period ending in March, a growth rate of 1.5 percent.
Dallas has consistently been near the top since the economy started creating jobs in the wake of the last recession. Since January 2010, Dallas added 697,000 jobs (an increase of 24 percent), while its population has grown by 780,000 (12.1 percent). Dallas has been second in the nation in creating jobs during the current decade, trailing only New York City, which has added 1.1 million jobs, although New York’s rate of growth has been much smaller at 5.2 percent.
Job growth in Dallas is broad-based, led by a host of high-profile corporate relocations and expansions, such as Facebook’s $1 billion data center that opened this week. Three sectors accounted for three-fifths of the 129,000 jobs added within the last year: trade, transportation and utilities (28,000), professional and business services (28,000), and leisure and hospitality (21,000). Still, every sector has increased at least by 1 percent during the last 12 months.
Wages, on average, have been stagnant with average hourly earnings sitting only $.02 higher in March than they were in January of 2015. Some of this can be attributed to the large share of employment growth occurring in the low-paying Leisure and Hospitality sector, which could be dragging down the average for the metro. While this sector accounts for only 11 percent of the entire Dallas labor market, its share of the growth since last March was 17 percent.
Another possible explanation can be found in the aforementioned population growth. Since residents have been flocking to the metro in droves, employers are finding it easier to fill jobs, which has created enough slack in the labor force to remove upward pressure on wages for the time being. Couple the mediocre wage growth with a massive supply influx in the coming year, and there could be absorption issues in the near-term for the multifamily industry in Dallas.
A skyline spattered with cranes is not a new sight in the city. Developers are trying to catch up to the population and employment growth that has occurred during the economic expansion. Roughly 78,000 multifamily units have been added this decade, according to Yardi Matrix. One new unit for every nine new jobs is a low ratio, even in a city like Dallas that is known for its suburban sprawl and availability of single-family homes.
Construction of multifamily properties has picked up in the last years and currently a total of 42,200 units are under construction with another 42,700 currently in the planning stages. The flood of new supply (33,700 units added since the start of 2015) has already dampened rent growth, down to 3 percent in April from 6.9 percent a year earlier according to Yardi Matrix. All the new supply set to enter the market in the next few years are sure to cause some short-term absorption problems as property managers look for tenants to lease the copious amount of new units. The current 95.1 percent occupancy rate indicates that the city, which certainly could use a few more units for its residents, doesn’t have the massive multifamily shortage seen in other metros.
The good news for property owners however, is that the employment and population growth has been so vigorous during this decade than any sluggishness should be short-lived. Due to the relatively cheap cost of living and tax friendly environment, many people and firms will continue to see Dallas as an attractive place to be. Furthermore, Dallas has a more diverse labor market than nearby Houston which is still feeling the sting of depressed oil prices.
The fastest growing metros for employment continue to be many of the same places that have the highest levels of population growth in the Census Bureau’s recently released population figures for 2016. Whether it is people moving to metros where jobs are abundant or firms locating in places that people want to live is a chicken-or-the-egg question that many demographers have attempted to answer in the shifting landscape of the 21st century. Whatever the answer, robust population and employment growth in these “smile states” is a trend that has persevered in the post-recessionary economy.
Image courtesy of the GreenDallas.net.