Continued Economic Uncertainty Restrains Private-Sector Hiring;

Private Sector job Growth Following recessionary periods

Continued Economic Uncertainty Restrains Private-Sector Hiring;
Risk of Stalled Growth Rising in Second Half

  • Heightened uncertainty among businesses over the sustainability of the recovery hampered employment momentum in June, as census cuts outpaced weak hiring in the private sector. While a double-dip recession remains unlikely, persistent weakness in the labor market continues to drive down consumer confidence and weigh on personal balance sheets, restricting spending and dampening the recovery. In the second half, private businesses will continue to add workers at a modest pace, bringing the 2010 total to 1.3 million. These limited payroll gains, as well as lingering doubts about credit availability and concerns the recovery may not become self-sustaining, will drag on the economy in the coming quarters.
  • Employers shed a net of 125,000 jobs in June, the first monthly decline in 2010, intensifying concerns over the strength of the recovery. Despite these losses, a few bright spots persisted, as several sectors expanded during the month, led by the addition of 37,000 leisure and hospitality positions. Growth in most segments was minimal, however, highlighting the cautious stance prevailing at most companies. Also, employers continue to rely heavily on temporary workers, who account for nearly one-third of all private jobs added this year. Contraction in June was most pronounced in the government sector, as 225,000 temporary census positions expired.
  • Private-sector employment growth in June outpaced the previous month but lagged the gains recorded earlier this year, as firms remain hesitant to commit resources until the recovery demonstrates clear signs of sustainability. Private employers added 83,000 workers in June, the sixth consecutive month of gains. Year to date, employers have added 593,000 non-government positions for a 0.6 percent increase, the slowest private-payroll growth following a recession since 1992 and the second slowest pace of recovery since World War II. Without more substantial hiring by the private sector, unemployment will remain elevated, and the economic recovery will be slow to gain momentum.
  • The unemployment rate dipped 20 basis points to 9.5 percent in June; however, the decline was attributable to individuals leaving the labor force, rather than improving employment conditions. While elevated unemployment will restrain household formation in the near term, apartment vacancy will inch down 50 basis points in 2010 to 7.5 percent as the expiration of the homebuyer tax credit and continued weakness in the housing market sustain the renter pool.
  • Weakness in the financial activities sector has weighed on tenant demand for office space. Employers continue to eliminate financial positions, shedding 73,000 workers thus far in 2010. Despite minimal completions, office vacancy will increase 100 basis points this year to 18 percent on negative net absorption of nearly 25 million square feet. Metro areas with high concentrations of financial firms, such as New York City, Dallas/Fort Worth and San Francisco, will likely see a rise in competition from sublease space.

 

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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