Sunbelt Cities Nashville and Austin Are Nation’s Hottest Job Markets

Those Sunbelt cities benefited from a continued recovery in travel and a hiring boom at restaurants, hotels and music venues, consistent with the resurgent services sector driving the U.S. economy in recent months. Many remained relatively affordable as high inflation gripped the nation. Meanwhile, some Western job markets that heated up after the pandemic took hold—including Salt Lake City, Phoenix and Denver—cooled last year. 

The Wall Street Journal, working with Moody’s Analytics, assessed about 380 metro areas. The rankings determined the strongest labor markets based on five factors: the unemployment rate, labor-force participation rate, changes to employment levels, the size of the labor force and wages in 2022. Larger areas, with more than one million residents, were ranked separately from smaller ones.

Broadly, the U.S. labor market remains robust, with employers consistently adding jobs last year and into the start of 2023. The U.S. unemployment rate ticked up to 3.6% in February from a 53-year low of 3.4% in January. But recession concerns linger due to the Federal Reserve’s aggressive interest-rate increases intended to combat high inflation, banking turmoil and corporate layoffs in industries such as technology. 

Though the tides could shift, Southern cities have shown particular strength, with many top-ranked markets including Atlanta, Dallas, Charlotte and Raleigh, N.C., holding the ingredients to attracting and retaining workers.

“These are lower-cost areas, they are growing rapidly, there’s an increasingly large critical mass of young, educated people,” said

Adam Kamins,

economist at Moody’s Analytics. “The affordability is really appealing to families as well.”

The two highest-ranked labor markets profited from strong rates of labor-force participation. Nashville, the nation’s hottest job market, had the third highest share of adults working or looking for jobs. Austin, which held the No. 2 spot, touted the strongest labor-force participation among large metro areas, in part a reflection of its relatively young population.

These fast-growing Southern state capitals with vibrant music scenes have drawn in many new workers and companies in recent years. Investment firm

AllianceBernstein

LP opened its new corporate headquarters in Nashville last year.

Elon Musk’s

electric-car maker

Tesla Inc.

moved headquarters to Austin in 2021, and he is laying plans for a new community outside of Austin, next to facilities of Boring Co. and SpaceX, two other companies he controls.

Jacksonville edged up in the rankings last year, becoming the third-hottest job market, after placing sixth a year earlier based on revised 2021 data. The region, positioned as a logistics hub in northern Florida, has been a magnet for remote workers and new companies during the pandemic, said Mike Brady, owner of two Express Employment Professionals staffing offices in Jacksonville. Affordable homes and Florida’s lack of state income tax are two big contributors, he said.

“There has been explosive growth,” Mr. Brady said. “We’re still seeing warehouses being built. We’re still seeing companies move in.” 

The surge in demand for workers has been hard to meet, though. Mr. Brady’s firm specializes in recruiting warehouse employees and workers in skilled trades such as forklift operator and electrician, many of whom can easily quit for higher pay.

“If we place somebody on a job, and they don’t like the job, then they will just simply go to another job,” he said. 

To attract and retain workers, employers across Jacksonville are ramping up wages. The city’s weekly wages grew at the fourth-fastest rate of any large metro area last year. Its South Florida cousin, Miami, logged the nation’s largest wage gains. 

Hot Southern job markets tend to offer a much lower cost of living than many coastal cities competing for tech and finance workers. Still, an influx of workers has fueled higher living costs, especially housing costs, in many Sunbelt cities. Their big price run-ups make them vulnerable to a home-price correction that is already under way in Western cities.

Pandemic travel restrictions and the spread of Covid-19 caused tourism hot spots such as Las Vegas to suffer in 2020 and into 2021. That turned around last year, despite high inflation and recession jitters. Sin City added jobs at the fastest pace of any large metro in 2022. International travelers began returning to Vegas while older consumers shook off pandemic concerns.

Other tourism hot spots in the South, including New Orleans and Orlando, also made notable climbs up the rankings last year. Though employers in these regions began to reopen as early as spring 2020, many faced a long road to recovery.

Business at the Florida Hotel and Conference Center in Orlando, which has 511 guest rooms and 23 conference rooms, took a dive with the onset of the pandemic in 2020. Room cancellations flooded in and the company lost roughly $1.5 million a month, pushing it to eventually resort to layoffs, said Simone Kuska, corporate director of sales and marketing. 

With the continuation of travel restrictions, the hotel and meeting center was slow to regain ground. Last spring, though, marked a pivotal point, Ms. Kuska said. “That is when we first saw that, ‘Wow, we can fill this hotel again,’” she said. 

In more recent months, business travelers have returned, helping drive revenues back to prepandemic levels, Ms. Kuska said. “Everybody is just out and about saying, ‘I’m tired of Zoom calls, I want to do an in-person meeting like we used to,’” she said, noting the Florida conference center now has sufficient staffing to meet the surge in demand, following labor shortages earlier in the pandemic.

Across Orlando, New Orleans and Las Vegas, more workers jumped into the labor force last year, helping fill open roles at restaurants, bars and hotels. In the U.S. as a whole, employers in leisure and hospitality have been on a hiring spree, driving a surprisingly resilient labor market in the face of rising interest rates and high inflation.

Cities including Salt Lake City, Phoenix and Denver drew in many workers seeking lower housing costs or outdoor adventure near the onset of the pandemic. As higher-wage remote workers moved in, they helped trigger high inflation and rapid increases in home prices that made these areas less-attractive destinations, Mr. Kamins of Moody’s said. 

Consumer prices in the Phoenix area rose 8.5% in February from a year earlier, according to the Labor Department, well faster than 6% national inflation. 

The three Western cities slid in the job-market rankings last year. Still, they far outperformed some larger, more-expensive regions including New York, Los Angeles and Washington, D.C.

New York was among the few large metros that lost workers from its labor force last year. Los Angeles had above-average unemployment and below-average wage growth. Washington had strong labor-force participation among its residents, but struggled more than most cities to attract new workers and jobs.

Write to Sarah Chaney Cambon at [email protected] and Danny Dougherty at [email protected]