DIGITAL* momentum chart
Total non-farm payroll employment

Scatter plot showing the percentage change of non-farm payroll employment in US cities in Q4, 2020

BLS, Moody's Analytics, Q4 2020.

Employment rose in the fourth quarter for 43 of the 48 markets that Principal Real Estate Investors tracks, as many markets continued to loosen pandemic-related restrictions. Despite declining employment at the national level in December, the majority of markets are gathering momentum as they accelerate from their February troughs. Our internal DIGITAL sum of markets has outpaced the nation in the past quarter but remains slightly behind on an annual basis, due to the significant drag of larger, gateway markets.

We continue to see significant divergence in employment growth between larger coastal markets and smaller secondary markets. Cities such as Austin, Salt Lake City, Dallas-Ft. Worth and Phoenix have been leading job creation due to more lenient lockdowns, growing industries and a more appealing quality of life attracting an influx of new residents. Meanwhile, New York, San Francisco, Chicago and Los Angeles have seen slower recoveries, largely due to stricter lockdowns and a larger concentration of employment in retail, leisure and hospitality industries.

Top 5, bottom 5 cities

Table showing 3 month employment change percentages for the top and bottom 5 US cities as of Feb 2021

BLS, February 2021.

We expect that widespread vaccinations will enable the economy to recover lost ground quickly in the latter half of 2021. Despite this, employment will not rebound evenly in all markets. Some outperformers could see a return to peak employment as early as this year. Most markets will not see a full recovery until 2023 or later, however. Additionally, some industries will be altered permanently by the pandemic. The retail, leisure and hospitality sectors continue to shed jobs despite a broader—albeit moderating— national recovery and will remain a laggard as they continue to see closures of restaurants, hotels and brick and mortar stores.

U.S. Industry employment
Monthly % change

Bar chart showing percentage change in US employment by industry from August 2020 - January 2021

BLS, February 2021.

*DIGITAL refers to key long -term growth drivers centred around demographics, innovation, globalization, infrastructure, and technology that Principal has identified as metrics of long-term market outperformance.


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