Posted by: BayAreaComRE | January 13, 2010

December job numbers worse than they appear?

While the national unemployment rate remained unchanged in December at 10%, the comprehensive guage of underemployment increased to 17.3%. “Though the rate is still 0.1 percentage point below its high of 17.4% in October, its continuing divergence from the official number (the “U-3″ unemployment measure) indicates the job market has a long way to go before growth in the economy translates into relief for workers.” reported the WSJ (See full article). 

And the overall numbers since the “Great Recession” began back in late December are possibly the most sobering of all. “With December’s losses, there were 7.2 million fewer jobs than in December 2007, when the recession began. Although the unemployment rate was unchanged at 10% from November, that’s only because many workers stopped looking for work and weren’t counted in the numbers.”

Bay Area ComRe recently reported that despite the lack of hiring, companies have weathered the storm and improved balance sheets (see “It’s the jobs, stupid”) “Economic figures released so far suggest that gross domestic product — the broadest measure of the value of goods and services produced by the economy — grew at a 5.4% rate in the last three months of 2009.” (See full article in WSJ) The same economy lost 85,000 jobs last month, and needs 100,000 just to break even, taking into account population growth.

But a deeper question remains to be answered. Are companies performing better because they are not hiring?

“It is possible that many of the job losses in the manufacturing and financial services sectors may be lost forever. The restructuring of these sectors eliminates some positions as obsolete, and redirects others to lower-cost global labor markets,” says Rocky Tarantello in the Real Estate Forum article “How Do We Truly Measure An Economic Recovery.”

A few Bay Area companies would disagree. While major lay offs at AOL will add up to 1,200 workers to the 7.2 million who have lost thier job since the start of this recession, we have seen significant growth and hiring with social networking and cloud computing companies like Facebook, Twitter, Joyent and (all of which have a significant presence and HQs in the Bay Area). Graham Smith, CFO of, recently appeared on a panel for the CFO Roundtable hosted by Cushman & Wakefield, Haas School of Business and Accenture, and delineated the business model of that has propelled them as a dominant business and active recruiter for new talent, and he portends they will keep going.

The National Real Estate Investor shed some light on the umemployment numbers. “One positive sign for the office market is that the professional and business services segment added 50,000 jobs in December. Additionally, the number of education and health services jobs rose by 35,000.” (See full NREI article)

We think the Bay Area is best suited to emerge from this hiring deficit, but the economy will look very different. Sure, businesses and entire industries needed to become more efficient and shave off some of the fat to spark growth, but we are hoping this translates soon into more jobs. This can start by improving working environments and ensuring a company’s real estate supports the new business model and employee structure. This has started in the tech sector, but will certainly spread to the service sector and beyond.


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