The FINE PRINT on “Job Creation” and What It Means For YOU | Episode 4

This Article was Discussed in Episode #4 of the REI Today Podcast – Click Here to Listen Now

One of the best ways to identify soon-to-be thriving housing markets is to take a look at local jobs numbers. For investors who love shortcuts, the Gallup Job Creation Index (GJCI) is a great way to start looking, since it identifies states that are trending positive and negative in terms of job creation, enabling a savvy, research-minded investor to narrow down his or her target markets from there. H

However, it is vitally important that you do not, when using the index, confuse a handy shortcut with an instant “thumbs-up/thumbs-down” sign for state housing markets. While the jobs index is a great tool, it does not measure the quality of jobs or the “job numbers” associated with the jobs created.

So what is a jobs number?

A jobs number is the number of jobs that a single job can create in a local economy. For example, a single high-paying IT job can create more than 10 additional jobs as the prototypical employee moves to the area, brings his or her family, hires help for his or her family, begins frequenting local eating and entertainment venues, and generally begins to participate actively and in an impactful way in the local economy. Jobs number is related in many cases to salary, but it also is related to the type of job being done. As a general rule, for example, a high-level IT job will actually create more jobs than a similarly-paid job in finance.

So what does this tell me about DETROIT, MICHIGAN?

Well, at time of publication, the state of Michigan was tied with four other states (Arizona, Florida, Ohio, and Washington) at number 10 on the list of top 10 states for job creation according to the Gallup Index. A metro-level poll conducted in the middle of last year placed metro Detroit as sixth in the nation for job creation compared to comparable metro areas. On the surface, things are looking up in the Midwest. However, a savvy investor needs to evaluate what types of jobs are being created in Michigan in order to invest correctly. What types of homes are new employees likely to be buying? Are they looking for starter homes? For example, in Birmingham, Alabama, one of the best types of properties to own is actually bottom-tier single-family rentals. That’s what sells consistently and has for the last two decades. On the other hand, in hot spots in Arizona and Texas, where the IT crowd is growing, an investor would do better to renovate and flip mid- and upper-mid-level homes to owner-occupants eager to settle into the area and put down roots.

In Michigan, and in Detroit in particular, one in every 10 new jobs is, as it has historically been, in manufacturing. However, nursing, software development, and network security are growing much more quickly as the state works to establish a presence in today’s new economy. Interestingly, however, the state is also experiencing a current shortage of truck and transport drivers, which has led several national firms to open driver schools in the area. As you can see, the fine print tells us that Michigan is experiencing diverse jobs growth, including some in that invaluable tech sector, but that it will be important to evaluate the buyer population on a local level before sinking your money into a market.

Lesson: Just jobs are not enough, although they definitely can point the way to an up-and-coming market.

Point to Ponder:

According to the Detroit Free Press, the most in-demand workers in Michigan these days are commercial drivers, ethical hackers, nurses and nurse practitioners, and welders.

Would you move to Detroit to get any of these jobs?

Thank you for reading REI Today’s News and Networking Section!

Your comments and questions are welcomed below.

Listen to Episode 4 now.

About the Author

Carole Ellis is the host of Real Estate Investing Today, a popular 9-minute daily podcast focused on educating real estate investors about the important topics that will make their investing SAFER, FASTER, and MORE PROFITABLE. She's also the editor of the Bryan Ellis Investing Letter. She has more than a decade's worth of experience in and reporting on the real estate industry and, additionally, has written dozens of courses on the topic. Carole lives in Kennesaw with her husband, Bryan, and four children. She believes wholeheartedly that your best investment is always your OWN education.

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