Job Market Stalls as Economic Uncertainty Raises Caution; Double-Dip Recession Remains Unlikely

July 8, 2011

  • Job growth stalled for the second month in a row in June, with employers hiring the fewest workers in nine months. Cuts in government payrolls offset modest job creation in the private sector, where many employers have grown increasingly skittish despite recent economic improvements that have elevated corporate profits and solidified balance sheets. The simmering financial crisis in Europe,  diminished trade with  Japan, a feeble housing market and squabbling over the debt ceiling and deficit continue to cultivate uncertainty and will support only moderate near-term job growth.
  • Only 18,000 jobs were added in June, following a gain of 25,000 positions in May. In June, the government sector reprised its role as a drag on employment, as an additional 39,000 positions were cut, the 13th consecutive month of trimming. Budget shortfalls resulted in a loss of 25,000 positions at state and local agencies during June, and local government payrolls have now declined for 20 consecutive months. Further job cuts will accumulate in the months ahead as budget pressures persist.
  • In the private sector, slight job growth and light cuts underscored the willingness of employers to defer substantive hiring amid lingering economic uncertainty. Overall, six of 10 private-employment sectors created a total of 81,000 positions in June; these sectors offset a small loss of 24,000 jobs in financial services and construction, yielding a net gain of 57,000 workers to private-sector payrolls. Manufacturers added 6,000 jobs last month, although the modest increase betrayed concerns regarding the sustainability of consumer demand. Leisure and hospitality employers geared up for the peak summer travel season, adding 34,000 positions.
  • Impact on Commercial Real Estate

  • Full-time office-using employment rose for the ninth consecutive month in June with the addition of 9,000 workers, the smallest monthly gain during that time. Nonetheless, the addition of 311,000 full-time office jobs since last September when job growth resumed has helped backfill underutilized space and generated positive net absorption of more than 8 million square feet. In 2011, the national office vacancy rate will decline 60 basis points to 17 percent as demand gradually strengthens and few new properties come online.
  • Employment growth and the release of pent-up demand helped reduce
    national apartment vacancy by an estimated 30 basis points in the second quarter and 190 basis points in the past year, to 5.9 percent. The positive effects of pent-up demand will gradually wane, however, and job growth will take over as the primary driver of additional reductions in vacancy. Weaker hiring in June and May will slow demand during the second half of 2011, but the national vacancy rate remains on track to fall 100 basis points this year to 5.6 percent.

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The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.

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