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COSTAR INSIGHT - Industrial Powerhouses Lead the Nation in Job Growth

Sun Belt Gains Help Offset Midwestern, Northeast and West Coast Losses in December

Kansas City stood out as a rare Midwestern growth story, posting solid gains in the trade, transportation and utilities sector in December. (Dean Hochman/Flickr)

By David Kahn and Sam Tenenbaum CoStar Analytics February 3, 2021 | 10:24 AM

Though U.S. job growth faltered after seven straight months of positive gains, the Sun Belt region, led by a pair of industrial heavyweight markets, is going strong.

Job growth turned negative in December for the first time since April when the nation experienced unprecedented job loss following the onset of the coronavirus pandemic. In particular, the leisure and hospitality sector saw significant job losses at the end of the year, reversing the trend of steady gains leading up to the holiday season.

Among the largest metropolitan areas in the country, about half saw job gains in December while half experienced job losses. Cities with large industrial and logistics sectors tended to outperform, as seasonal hiring in the retail trade and transportation industries helped boost employment throughout the country.

November’s Midwestern malaise carried into December, as cities such as Minneapolis and Detroit saw significant job losses to close out 2020. Other Rust Belt cities such as St. Louis, Milwaukee, Chicago, Cleveland and Pittsburgh shed jobs last month.

Many large East and West Coast cities, including New York, Los Angeles and San Francisco, also posted job losses in December as COVID-19 cases ticked up. With restrictions back in place, losses were concentrated in the leisure and hospitality sector.

Honolulu once again led the nation in terms of job gains as a percent of total employment. Hawaii's capital city gained roughly 5,000 leisure and hospitality jobs in December, though employment in that sector is still down about 32% year over year. Despite the gains, Honolulu remains one of the weakest performers over the past year.

The big winner in December was the greater Sun Belt — a region that has consistently outperformed the nation during the COVID-19 recovery.

Atlanta and Dallas-Fort Worth, two of the largest metropolitan areas in the Sun Belt region, each posted impressive job gains of nearly 1% in December. While Atlanta and Dallas essentially tied for fifth for percentage of job growth in December, it translated to nominal gains of 25,000 jobs for Atlanta and 33,000 jobs for Dallas — far and away the two best marks in the country.

Both cities were boosted by booming logistics and warehousing sectors. Trade, transportation and utilities employment was up more than 18,000 jobs in Dallas and about 12,000 jobs in Atlanta. While those increases were partially due to the seasonal increase in that sector’s employment during the holidays, employment in trade and transportation is up on a year-over-year basis in both cities, a sign that recent growth wasn’t just inflated by a flurry of holiday hiring.

Other relatively smaller Sun Belt cities in the top 20 included San Antonio and Austin in Texas; Nashville and Memphis in Tennessee; Tampa, Palm Beach and Jacksonville in Florida; and Raleigh and Charlotte in North Carolina. The larger metropolitan areas of Phoenix and Houston both posted gains, but those gains were relatively tepid compared to places such as Dallas and Atlanta.

After a weak November, Indianapolis regained ground in December, bucking the Midwestern regional trend of slower growth to end the year. Kansas City also stands out as a rare Midwestern growth story, with the area posting solid gains in the trade, transportation and utilities sector as well as the professional and business services segment.

Many of the same cities that ended the year on a high note also rank as the most resilient areas on a year-over-year basis. Salt Lake City and Indianapolis continue to inch toward positive territory, while the consistent Sun Belt outperformers of Austin, Dallas-Fort Worth, Phoenix and Atlanta are not far behind. With consistent growth across these markets in recent months, it’s likely that they will turn positive in the early part of this year.

Despite impressive recent gains, Honolulu still ranks as the worst region for employment over the past year, highlighting just how profound of an impact the pandemic has had on Hawaii’s economy. Other tourism hot spots such as Orlando and Las Vegas continue to lag as well.

But it’s the expensive Northeast and West Coast cities that stand out as underperformers. Many of these cities were hit hard by the pandemic’s initial wave, and though these markets have recovered some jobs since April, they have yet to experience the same surge of hiring as their Sun Belt counterparts. That stands in stark contrast to the previous recession, when these large markets remained more consistent and saw fewer jobs shed than the overall U.S. figure.

It also stands as a stark reminder that the pandemic remains the most important risk to the economic recovery. While it appears as though the U.S. has started recovering from the winter wave, COVID-19 cases remain elevated throughout the U.S. The hope is that vaccination efforts kick into high gear nationwide, bringing some sense of normalcy back to the job market.

The $900 billion recovery bill approved by Congress in December should help provide businesses and individuals additional support over the next few months, and any additional fiscal stimulus would help jump-start the nation’s job recovery through 2021.

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