At 2.7%, South Florida’s unemployment rate remains the lowest across major metropolitan areas in Florida, though it has risen from recent lows of 2.1% in April 2023. Above-average growth in the area’s labor force over the past four months, relative to the pre-pandemic period from 2014 through 2019, and a slowdown in employment growth has contributed to a slight uptick in unemployment.
Despite this softening, the area’s labor force has increased by over 109,000 people and total employment increased by over 119,000 jobs relative to pre-pandemic highs, as the area’s labor market is stronger than ever.
Jobs in the professional and business services, along with financial activities sectors, have led the charge in job gains, growing by over 15% and 13%, respectively, relative to pre-pandemic levels, and totaling over 96,000 new jobs. With average annual wages of over $154,000 for financial Activities and over $93,000 for professional business services as of the first quarter of 2023, these newly created jobs offer pre-tax wages that are much higher than the South Florida industry average of around $77,000, according to the quarterly census of Employment and Wages.
This rapid growth in high-earning jobs, along with an influx of wealth since 2019, has contributed to a rapid cost increase in the area. In fact, South Florida continues to see the highest annual growth in inflation across major U.S. markets at 7.4% as of October, more than doubling U.S. average inflation of 3.2%. This increase continues to be driven by housing cost pressures, which seem unabated by the rise in interest rates.
Going forward, this rise in living costs will continue to place significant pressure on the majority of South Florida residents, as over 70% of households earn incomes of below $75,000 per year. In contrast, households now need to make over $140,000 a year in order to afford the median-priced home due to higher prices, elevated interest rates and increased insurance costs.
Going forward, a slowdown in job gains for high-earning, office-using job sectors will put additional pressure on the market’s affordability. Oxford Economics expects sectors such as professional and business services and financial activities to contract slightly through the end of 2024, ending their strong run in job gains as the macroeconomic environment becomes less favorable through the first half of next year. On the other hand, job gains are expected to be led by lower-earning sectors, such as leisure and hospitality and other services, through most of the coming year.
South Florida’s wage growth has already underperformed the national average since the second half of 2022, lagging inflation in the area. This slowdown in wages and high-income employment growth has resulted in a flattening of apartment asking rents over the same time period. In fact, after rising over 27% from October 2020 through October 2022, asking rent growth has remained muted through 2023.
Market participants have indicated a rise in evictions and an increased reliance on the use of guarantors has helped lower-income renters to qualify for increasingly expensive apartments. Additionally, a dramatic rise in insurance costs and interest rates is squeezing margins for newly built properties, which are in the process of refinancing construction loans.
A slowdown in high-income job gains, resulting in softer demand amid rising supply, points to continued rent growth weakness going into 2024. Concessions have already begun to rise, and cuts to asking rents are likely next as apartment owners continue to compete for an increasingly limited pool of high-income renters. With new supply not expected to abate until 2026, multifamily fundamentals will continue to underperform as landlords increase incentives to quickly stabilize their newly completed projects.
