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A Tight Labor Market Could Keep Rent Inflation Elevated

Author

Listed:
  • Brent Bundick
  • Andrew Lee Smith

Abstract

Rent inflation responds more to labor market conditions compared with other components of inflation. We attribute this link between labor market tightness and rent inflation to greater demand for rental units afforded by job gains and wage growth. Although online measures of asking rents currently suggest official measures of rent inflation will decline, we caution that rent inflation is likely to remain above pre-pandemic levels so long as the labor market remains tight.

Suggested Citation

  • Brent Bundick & Andrew Lee Smith, 2023. "A Tight Labor Market Could Keep Rent Inflation Elevated," Economic Bulletin, Federal Reserve Bank of Kansas City, issue March 1st, pages 1-4, March.
    • Handle: RePEc:fip:fedkeb:95857
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    File URL: https://www.kansascityfed.org/Economic%20Bulletin/documents/9384/EconomicBulletin23BundickSmithVanderMeer0301.pdf
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    More about this item

    Keywords

    rent inflation; labor market; inflation;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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