Posted by: BayAreaComRE | May 14, 2010

Behind the Numbers: The Recovery is Here

From our C&W Research desk, here’s an in-depth study on the underpinnings of the latest Unemployment figures. Thank you to Ken McCarthy and Maria Sicola of Cushman & Wakefield Research for gathering the information.

US Employment and Unemployment. The US economy added 290,000 jobs to payrolls in April, the strongest growth in more than 4 years (since March 2006). April is now the fourth month in a row and fifth of the last six months in which employment has increased. Since December 2009 the economy has added 573,000 jobs.

Highlights from the report include:

Employment was higher than originally estimated in both February and March. February employment was revised from a decline of 14,000 jobs to an increase of 39,0000 and March now shows the economy adding 230,000 jobs, far more than the 162,000 reported a month ago.

The increases were across the board. Employment increased in manufacturing (+44,000 jobs); retail (+12,000); professional services (+80,000); Leisure and Hospitality (+45,000); education and health (+35,000) and financial (+3,000). This was not a one sided or Government dominated increase. Excluding the 66,000 jobs created for the census employment increased 224,000 jobs.

In the critical office-using category (the sum of financial, professional services and information) employment increased by 80,000 jobs, marking the third month of the last six that office-using employment has increased. Since October 2009 employment in office-using industries has increased 197,000 jobs.

The unemployment rate increased from 9.7% to 9.9% as optimism about the economy appeared to draw workers back into the labor force. The labor force has increased by 1.6 million people since December as individuals have found work and others have started looking again.

Recovery is Here and Now. This suggests that the pace of employment recovery will exceed that of the last two recoveries. If we date the end of the recession as December 2009, employment has increased 573,000 jobs in 4 months. It took almost three full years after the 2001 recession ended before the economy had added that many jobs and in the recovery from the 1990-91 recession it took a year and a half.

This more rapid recovery is as much a reflection of the severity of the downturn as it is a result of a strong economy. Over the past two years businesses reduced employment more severely than in any recession since the 1930s. It means that even modest increases in demand for goods and services are forcing companies to add employees.

For the real estate industry, employment growth is the last, critical piece of the economic puzzle pointing to improving market conditions in 2010. The speed, timing and strength of recovery will vary across the nation depending on local economic conditions. However, in general, since this recession was not preceded by the sort of speculative construction that we have seen prior to past downturns, the increase in employment will tend to have a more immediate impact on vacancy than in past upturns.

To be sure, businesses will be cautious on expanding their real estate occupancy, preferring to fill in existing space before making new commitments, but as the economy improves, it is likely that a trend toward lower vacancy on a national level will emerge later in 2010 and become more widespread in 2011.

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