The Messy Math: Jobs, Wages, & Spring Leasing

release edition [064]

read time [10 minutes]

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Today at a Glance:

• Jobs: March Underlying Data
• Leasing: Will Spring Save Us?
• Break-Even: A Structural Shift
• Weekly Listen: David Zervos

On-demand institutional insights:

March Jobs

According to the most recent BLS jobs data release, the U.S. economy added 178,000 nonfarm payrolls in March. This print crushed the consensus estimate of 59,000, and the unemployment rate ticked down to 4.3%.

On paper, this looks like a strong report, but the underlying data is worth a closer look.

Let's start with the sector composition.

Healthcare added 76,000 of those 178,000 jobs. Of that, 35,000 came from Kaiser Permanente strike workers returning to their jobs in California and Hawaii. I consider this job restoration, not job creation.

Construction added 26,000 jobs while transportation and warehousing added 21,000.

Meanwhile, the federal government lost 18,000, and financial activities shed 15,000.

Said differently, strip out the strike reversal and the headline number drops to roughly 143,000.

Still a decent print, but not quite the blowout headline figure the market celebrated.

Now here is the part worth noting.

The unemployment rate fell to 4.3%, but the decline came almost entirely from people leaving the labor force, not from people finding jobs.

Why?

Because the labor force shrank by 396,000 in a single month, and labor force participation dropped to 61.9%, its lowest reading since November 2021.

The household survey, which is used to compute the unemployment rate, actually showed 64,000 fewer people employed.

As I like to infamously say "I'm not an economist", but this data does not inspire confidence that the labor market is healthy.

The headline says "jobs up", but the details say "people are disappearing from the workforce."

Gad Levanon, Chief Economist at the Burning Glass Institute, flagged the labor sector divergence in a recent post-report analysis (graph shown below).

Average hourly earnings rose just 0.2% for the month, and 3.5% year-over-year (shown below).

That annual figure is the lowest since May 2021.

Wage growth has been steadily decelerating since its peak above 5% in early 2022.

Oh, and if you're wondering about the "impacts of AI", check out the graph below showing that Information employment is now below where it would have been if the pandemic had never occurred. This is certainly alarming if taken at face value.

Perhaps this graph is masking a simple rotation of jobs within the Information sector (i.e from legacy media and broadcasting into data processing or hosting services, for example), rather than an overall shedding of all Information jobs.

Regardless, I'm not going full "doom and gloom" (yet...), but this sector and trend is worth watching carefully.

For Multifamily owners and operators, this quickly becomes a double-edged sword.

Slower wage growth takes some pressure off inflation, which would help the path to lower short term interest rates.

But, it also means that renters incomes are growing more slowly, and this wage compression matters in a market that already has elevated new supply with flat (or negative) rent growth.

The Indeed Hiring Lab put it well: The economy has adopted a "defensive posture."

Employers are not hiring aggressively, but they are not cutting aggressively either. Workers are not quitting because the opportunity to find something better has dried up.

The hires rate and the quits rate are both near historic lows.

The labor market is not collapsing, but rather, it appears to be freezing in place.

Summary

The March jobs report looks strong on the surface and fragile underneath. The headline beat was driven by a strike reversal in healthcare, while the labor force shrank by nearly 400,000 people. Wage growth is slowing and participation is trending downwards. The labor market is not breaking, but it's not exactly trending in a positive direction, either.

Keep an eye on the April and May data for confirmation. If participation keeps sliding, the demand side of the multifamily equation gets more complicated, regardless of what the headline payroll number says.

Actionable Takeaway

Consider tracking three metrics that tell a more honest story: The labor force participation rate, the quits rate, and year-over-year wage growth for the income cohort that matches your tenant base.

If you are underwriting a Class B workforce property, the 3.5% national wage growth number matters more to your rent trajectory than whether the economy added 178K or 78K jobs, especially if oil (and therefore gas, energy and eventually consumable prices) remain elevated.

Spring Leasing

Most of my Multifamily operator peers that I speak to regularly are cautiously optimistic that the Spring leasing season will begin a trend reversal back towards positive NOI growth.

After a brutal second half of 2025 and a flat start to 2026, the data (thus far) is not exactly in our favor, unfortunately.

As I've referenced over the past few weeks, the February Yardi Matrix report tells a rather sobering story.

Average U.S. asking rents held flat at $1,740, unchanged from January. Annual rent growth stood at just 0.1%, down 10 basis points year-over-year. (Marking now 18 consecutive months of little-to-no rent movement nationally).

Additionally, occupancy slipped to 94.3%, down 40 basis points from a year ago. Finally, half of Yardi's top 30 markets posted occupancy declines of 0.5% or more.

Yardi's own researchers flagged it directly: "Economic trends signal softness heading into the spring leasing season and raise the possibility that 2026 could shape up to be a weak year for rent growth."

RealPage tells a slightly different story on occupancy (94.8% in February, reflecting methodological differences with Yardi) but a consistent one on concessions.

As of January, 16.6% of stabilized apartments were offering concessions nationally, the highest level since mid-2014. The average discount sat at 10.7%. Class C properties led usage at 23.1%. In Q4 2025, rents fell 1.7% quarter-over-quarter, roughly double the typical seasonal decline, and over 23% of units were offering incentives.

Said differently, Multifamily owners ended 2025 discounting harder than at any point since the recovery from the Great Financial Crisis.

As mentioned above, the jobs report showed wage growth decelerating to 3.5% year-over-year, the slowest since May 2021, and will play a role in renewal rates along with market rents as supply continues to get absorbed over the next 12-18 months.

Let's flashback to the K-Economy framework that I introduced in TMD 004 where the top 20% of earners account for over 40% of consumer spending, and the bottom 50% hold only 2.4% of U.S. wealth.

Those bottom 50% households are disproportionately renters, and their wages just posted the weakest annual growth in four years.

If you operate workforce housing, the rent growth ceiling is not set by your comps or your proforma, but by your residents' paychecks.

The market bifurcation continues to confirm the Blue vs. Red thesis I laid out in Edition 039.

Gateway and Midwest markets that are supply-constrained with limited new deliveries are outperforming. On the other end, markets that overbuilt during the pandemic boom are still paying for it.

But, there is an underappreciated dynamic worth watching (which I wrote about last week in TMD 063).

Chandan Economics described the current labor market as "low-hire, low-fire," and the implication for apartments is important. When workers are less likely to change jobs or relocate, tenant turnover slows.

That sounds good for retention, and it is.

RealPage reported that retention climbed to near-record levels in 2025 because renters became more risk-averse as consumer confidence fell.

Historically, retention rises when sentiment dips causing residents to stay put because moving feels risky.

The flip side is that low mobility also suppresses new leasing activity.

Fewer people moving means fewer people walking into the leasing office.

And here's the kicker: when they do walk in, they have more options and more leverage than they did 18 months ago.

So, the real spring leasing headwind is that the pipeline of potential new residents is structurally thinner with fewer people changing jobs, changing cities, or forming new households.

Yardi is projecting just 0.5% rent growth nationally for 2026, with improvement to 1% in 2027 and 2.3% in 2028.

Even that modest forecast assumes that "the people renting workforce apartments have steadily increasing incomes."

At 3.5% wage growth (and potentially falling further), that assumption may become more difficult to defend.

Summary

Spring leasing is arriving alongside an environment of flat rents, 18-month stagnation, concessions at a 12-year high, and the slowest wage growth since 2021. Retention is high, but likely for the wrong reasons: Existing residents are staying because they are cautious, but not necessarily because they are satisfied.

The labor market's "low-hire, low-fire" posture means fewer people are moving, which thins the new lease pipeline. Hopefully the Spring rebound materializes, but my hope that it will is fading.

Actionable Takeaway

This week, pull your renewal offers for the next 60 days and compare them to your market's wage growth rate. Pushing renewals at 3%+ in a metro where wages are growing below 3% may not be well received by those residents.

It's much more efficient and cost effective to retain existing residents than try to replace them with new ones in a soft leasing market.

Also, ask your property managers for one number: traffic-to-lease conversion over the last 30 days. If conversion is holding but traffic is down, the "low-hire, low-fire" dynamic is hitting your market. If the conversion percentage has dropped then there are other impacts worth evaluating (pricing, specials, staffing, etc.).

Consider adjusting your marketing spend and concession strategy accordingly, because traffic to any of your properties is not going to improve simply because it's April.

Break-Even

I want to close this week's newsletter with something that has been on my mind after reading the Dallas Fed research published earlier this week.

For most of the past decade, the conventional wisdom was that the U.S. economy needed to create roughly 100,000 to 150,000 jobs per month to keep the unemployment rate stable.

Below that threshold, unemployment would rise. Above it, the labor market was tightening.

However, the data says that this math no longer works.

The Dallas Fed now estimates that the break-even rate, the number of jobs needed each month to hold unemployment steady, has fallen to near zero. And it may even be negative.

Read that again.

The primary driver is tied to demographics, due in large part to a sharp decline in immigration that has significantly reduced labor force growth.

Net unauthorized immigration turned negative in February 2025 and averaged roughly -55,000 per month in the second half of last year. Deportations and voluntary departures exceeded new arrivals by a wide margin.

Incorporating those population shifts, the Dallas Fed estimates the break-even rate fell to near zero by mid-2025 and averaged slightly negative from August through December. There is every reason to believe this has continued into 2026.

Here is why this matters: In the past twelve months, the U.S. economy has added just 260,000 total nonfarm jobs, or an average of just 22,000 per month.

Under the old framework, that pace would almost certainly produce a meaningful rise in unemployment.

Instead, unemployment has barely moved, going from 4.2% to 4.3%.

Translation: The old rules may not apply anymore.

This has direct implications for Multifamily, and I want to apply the first-principles framework I have used throughout this newsletter (see TMD 004 and TMD 009).

If the break-even rate is near zero, then what else must be true?

1. Demand models built on job growth are overstating future absorption.

Most institutional underwriting models assume a link between net job creation and new renter household formation. If the working-age population is shrinking, that relationship weakens. 100,000 jobs per month does not produce the same number of new households it did in 2019. This is one reason why I have subtly expressed the idea that the U.S. may not be as structurally "under suppled" as many of the headlines suggest over the next 10-15 years.

2. Supply is also constrained by the same force.

A shrinking labor pool means the potential for fewer construction workers. Construction labor costs are up over 20% from five years ago per ULI. Combined with tariff-driven material cost increases (multifamily construction costs are up 30%+ from five years ago), new starts are likely to continue to fall. Yardi projects 458,731 deliveries in 2026 and 439,571 in 2027, well below the 590,000 delivered in 2025. The pipeline is shrinking because the math to build does not pencil.

3. The labor market can appear stable while the economy quietly contracts.

This is the most subtle point to note. A break-even rate near zero means unemployment can hold at 4.3% even as job creation flatlines. This creates the illusion of economic health and employment stability.

But underneath, the economy is adding almost no new productive capacity.

For Multifamily owners, the risk is that we mistake a stable unemployment rate for a stable demand picture.

These are not the same thing.

I flagged this general theme in TMD 044 when I wrote about demographics defining the decade. The break-even rate collapse is the quantitative proof of that thesis. Immigration policy, population aging, and labor force participation are now more important to Multifamily fundamentals than the headline payroll number that lands on the first Friday of every month.

Summary

The Dallas Fed estimates the break-even rate for keeping unemployment stable has fallen to near zero, possibly negative, due to shrinking immigration and population growth. This means the old "100K-150K jobs per month" benchmark is obsolete.

The implication for Multifamily: Both demand and supply are being structurally constrained by the same demographic force. The labor market can look stable while the underlying economy adds almost nothing. It's important not to confuse a steady unemployment rate with a healthy demand environment.

Actionable Takeaway

If what the Dallas Fed is suggesting is true, then certain demand assumptions must be stress-tested.

For example, stress-testing the Year 1 and Year 2 occupancy projections against a scenario where monthly job creation averages just 25K-50K nationally. Go-forward underwriting projections should reflect far softer net-new demand.

Weekly Listen

This week's listen is David Zervos, Chief Market Strategist at Jefferies, on CNBC's Power Lunch segment from a few weeks ago. Zervos argues that the Fed's balance sheet has contracted to near-neutral, leaving rate policy doing all the restrictive work. His phrase: "Restrictive policy is feeding negative demand."

Relevant to everything in today's issue, and worth the watch heading into the Kevin Warsh transition in May.

You can listen to the segment here.

Wrap Up

That's it for today. Three threads, one theme: The surface numbers are not telling the full story right now.

The labor market looks strong until you read the fine print. Rents are positive until you compare them to slowing wages. And unemployment is stable until you realize the goalpost moved.

If you found this issue valuable, I would appreciate you forwarding it (or this link) to one person in your network who is actively underwriting deals or managing a portfolio.

Hit reply any time. I read every response.

See you next Saturday!

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