Friday, October 19, 2012

Pueblo Snapshot: Employment and rental housing

New employment data was released today, and Pueblo again reported the highest unemployment rate of all metro areas in the state. In recent years, the Pueblo area has experienced a consistently high unemployment rate and, not surprisingly, small amounts of new housing development. See below for details.

As of September 2012, the unemployment rate in the Pueblo area was 10.1 percent (not seasonally adjusted). This was up from September 2011's rate of 9.9 percent. The first graph shows that the unemployment rate in Pueblo has been near or above 10 percent each month since January 2010. We can also see that the unemployment rate in Pueblo has been higher than that in metro Denver for almost every month since at least 1990. Even during much of the last expansion, from 2003-2008, the unemployment rate in Pueblo was at or near 7 percent. Presently, the unemployment rate in Pueblo is moving sideways while the unemployment rates in northern Colorado and metro Denver continue to fall. 

In the second graph, I have indexed payroll employment in Pueblo and in the metro Denver area. The graph shows how total employment has grown less in Pueblo than in metro Denver over the past 15 years or so. Employment growth was strong during the 1990s, but only moved sideways from 2000 to 2005, and has seen no gains since 2008. Total employment in the Pueblo area has returned to peak levels (according to the establishment survey), but  increases in the labor force in the area continue to drive higher unemployment rates. 

The third graph shows that year-over-year growth in employment in recent months has been very weak in Pueblo. The area lost jobs, year over year, during Spring 2012, and has grown at only 1 percent or less for most months of 2012. Total employment grew 1.4 percent form September 2011 to September 2012. This follows the job losses of 2009-2010, which were probably the largest annual rates of job loss since the 1980s. 

In spite of job losses and lackluster growth, apartment vacancy rates in Pueblo have been falling since 2010. The declines in vacancy are being driven at least in part by a lack of new construction in housing in the Pueblo area. The vacancy rate during the second quarter of 2012 was 4.2 percent, which was the lowest vacancy rate for Pueblo since the third quarter of 2002, when the vacancy rate dropped to 3.9 percent. Natural population increases may also be a factor, but as the labor force data shows, workers are staying in Pueblo and looking for work, and they will need housing in Pueblo as long as they stay in Pueblo. 

As apartment vacancies move down, rents are moving up. The average rent in Pueblo during the second quarter of this year was $602 which was an all-time high. Whether or not this constitutes and actual trend remains to be seen, but the most recent increase follows a long period of generally flat rents in the area. The average rent is still only 5.6 percent above the previous peak of $570 reached during the first quarter of 2011. Although lack of new supply and declining vacancy rate point toward rising rents, a lack of employment will put some downward pressure on rent levels as renters look for the least expensive units. 

The final graph shows new single-family and multifamily permits for each month since 1988. Obviously, single-family construction is well down from peak periods. 19 new single-family permits were issued during August 2012, which was down 83 percent from the peak level of 116 issued during May 2006. Nevertheless, single-family permitting increased 141 percent from August 2011 to August 2012, more than doubling from 8 to 19. (Figures are seasonally adjusted.) 

As mentioned above, a lack of new multifamily units is helping to drive down vacancy rates. The last graph also shows multifamily permits, and since 2009, new multifamily permitting activity has mostly disappeared, and has been at or near zero since Spring 2011. Pueblo has never been a very active area for multifamily production, but activity has been even more absent than usual during 2012.