For investors eager to embrace recent affirmations of a turnaround in commercial property fundamentals, Friday’s labor report should offer a modest check on their rising sense of optimism. One and a half years following the official end of the recession, US employers added just 103,000 jobs to national payrolls in December. While the unemployment rate dropped to its lowest level in 19 months, that decline reflects a large number of discouraged Americans giving up on their job search and a corresponding decline in the labor participation rate. Neither one of these outcomes is consistent with a robust improvement in the health of the US labor market. 

After initial indications of momentum last spring, labor markets returned more mixed results through the end of the year. Overall, a net of 1.1 million jobs were created in 2010, leaving the economy 7.4 million jobs short of the pre-recession employment peak in December 2007. Almost all of the last year’s net job growth was in the first five months, between January and May 2010. Since May, however, the economy has added just 118,000 jobs, or fewer than 17,000 per month. Of course, adjustments in government payrolls, including temporary Census workers and cutbacks in state and local governments, contribute to this alarming result. Private payrolls have measured stronger results, increasing by 820,000 jobs between May and year-end, and by 1.4 million jobs over the year.

But even at their modest levels and in spite of relatively healthier growth in private payrolls, job gains have been uneven. The most observable increases have been in sectors such as leisure and hospitality, and the education and health services industries that have been growth areas even through the length of the recession. Employment in professional and business services has been growing since mid-year 2009, but much of the increase has been in temporary workers. In areas such as financial services and other professional fields, employers have yet to translate a return to pre-recession corporate profits (on a nominal basis) into new jobs or a comparable increase in wages and salaries. The recovery, thus far, has favored businesses over consumers and households, tempering direct and indirect demand for space. 

Placing December’s job market numbers in a larger context is instructive for the interpretation of the new result. If the December report marks a new trend level, it will take just under 6 years to replace the jobs lost during the downturn. In that case, we will not return to the employment level that prevailed just before the recession until 2017.  Factoring in for growth in the working-age population, the unemployment rate will remain above its estimated structural rate until the 2020s. Of course, employment growth is likely to accelerate as business confidence rises, labor productivity slips, and aggregate demand picks up. But this acceleration in job creation may not come soon enough for today’s property investors and operators, or for policymakers concerned about the fate of the long-term unemployed.

So whether we are motivated by conscience or cap rats, finding means to accelerate employment growth must be a priority as Washington reconvenes for a new session of Congress. On the Chief Economist’s wish list: first, decisive action to lower the administrative and tax barriers to new job creation. A close second, concrete steps to improve business confidence by righting our long-term structural deficit through entitlement reform.