Wednesday, January 9, 2013

Pueblo Snapshot: Employment and Rental Housing

Here's a snapshot of employment and rental housing in Pueblo.

The unemployment rate in Pueblo is the highest of all metro areas in Colorado. The unemployment rate was 10.1 percent in Pueblo during November 2012, and was up from November 2011 when the unemployment rate was 9.6 percent. During November 2012, the metro Denver unemployment rate was 7.4 percent, down from 7.7 percent during November 2011. As the first graph shows, the gap between unemployment in Pueblo and unemployment in metro Denver has been growing.

Pueblo's unemployment rate has been pushed up by the fact that few workers have been leaving the workforce in Pueblo, which is contrary to the trend seen in much of the state where the workforce size is stable or even falling in some cases (according to the Household Survey). 

The second graph shows the index for total payroll employment in Pueblo and Metro Denver, as measured by the Establishment Survey. Since 2008, we can see that employment in metro Denver and in Pueblo is heading back up to peak levels.  If we look very carefully, we see that there was a sizable drop in employment during mid-2012 in Pueblo employment. From December 2011 to April 2012, the Pueblo area lost about 1,400 jobs. 

The third graph shows the year-over-year change in total employment for each month. In Pueblo, employment declined year over year during early months of 2012. Colorado in general has shown year-over-year increases every month since since 2010, but in Pueblo, employment growth turned negative during early 2012.  This suggests that employment growth was rather shaky in Pueblo during 2012, and year-over-year growth in recent months has also been quite small. 

Until the third quarter of 2012, the vacancy rate was heading down quite quickly in Pueblo, in spite of lackluster job growth. The third quarter showed a surge in the vacancy rate, rising quite dramatically to 15.8 percent. The Pueblo vacancy rate was 7.3 percent during the third quarter of 2011. This is highly unusual to say the least, so we double-checked the data. The increase in vacancy appears sound and was not even limited to any one part of the city. There was a general increase in vacancy. We believe that this surge in vacancy is a matter of frictional vacancy, since as can be seen in the graph for average rent below, the average rent in Pueblo has increased significantly over the past 18 months. Coupled with an unemployment rate over ten percent, recent rent growth is contributing to additional vacancy and renters seek out more affordable living arrangements. 

The fifth graph shows the average rent in Pueblo.  During the third quarter of 2012, the average rent in Pueblo was $587, and was up from 2011's third quarter average rent of $541. The average rent has increased $75 since the second quarter of 2011, and has contributed to some sizable year-over-year increases in the average rent in Pueblo. If we make a two-year year-over-year comparison, however, we see that the rate of increase in recent quarters is often in the range of 5 percent to ten percent. 2011 saw some declines in rents as renters as unemployment impacted income. From the third quarter of 2010 to the third quarter of 2012, the average rent increased 6.5 percent in Pueblo, although it rose 11.2 percent from the second quarter of 2010 to the second quarter of 2012. 

These changes do suggest some volatility in the Pueblo multifamily market and we have seen a lot of that in recent years. Permit activity has shown some large changes during recent months as well. The last graph shows multifamily permitting in the Pueblo areas. Multifamily permitting fell to a small trickle of permits during late 2010 through most of 2012, but during October 2012, the new Outlook Ridge complex led to 92 new multifamily permits being issued. This is by far the largest amount of new multifamily permits being issued in a single period in a very long time in Pueblo. The graph shows seasonally adjusted numbers, but the non-adjusted numbers show a one-time surge in permits to 92 during October following many months of permit activity near zero. Very, very little multifamily permit activity took place between 2007 and October 2012.

The overall employment trend in Pueblo right now is one of high unemployment, but with some slow and steady job growth durign the second half of the year. The first half of 2012 was not a robust period for the job market in Pueblo, however.

While job growth was starting to improve a little during the second half of 2012, the effects of early 2012's 10.5+ percent unemployment rates was being felt in multifamily with the third quarter's surge in vacancy. The lack of new supply continues to help drive rent growth, however.