The question facing the economy, and by extension commercial real estate, is whether the recovery has built up enough momentum to keep going after the stimulus package and the inventory correction cycle fade. More recently, the question has morphed into whether the U.S. economy can withstand a hit from Europe in the form of financial contagion and slowing growth if not an outright recession in the eurozone countries. The answer lies in job creation, the missing piece to make the domestic recovery – under way since the third quarter of last year – self-sustaining.
So far, the jury is still out. The May employment report from the Labor Department, released Friday morning, counts a total of 431,000 net new payroll jobs created last month, but only 41,000 of those were private sector jobs. Hiring for the decennial census accounted for 411,000 public sector jobs, which will disappear in a few months after the Census Bureau completes its work. Manufacturing continues to be a bright spot, adding 29,000 last month while temporary help services increased by 31,000. The unemployment rate fell from 9.9 to 9.7 percent, but this was due to a decline of 322,000 in the number of people actively looking for work (counted in the labor force). The U-6 rate, which includes those discouraged workers as well as people who are working part-time but would prefer a full-time job, fell from 17.1 to 16.6 percent.
The employment news could be better, but this report is in line with a sluggish economic recovery versus one that is V-shaped. The silver lining is that a weak employment report is likely to keep a lid on interest rates, inflation and energy prices, which should help support continued, moderate economic expansion.
Have a great weekend!
Compliments of Robert Bach (Grubb & Ellis - SVP, Chief Economist)