Retail, Industrial See Gains in Sour Jobs Figures

WASHINGTON, DC-Last week’s employment data released by the Labor Department gave a disheartening view of the pace of the recovery: private sector businesses added an anemic 71,000 jobs to the economy in July. 

For the real estate industry, the news wasn’t what the industry had hoped for, says Cassidy Turley’s Kevin Thorpe. And digging deeper into the report he finds even more worrisome trends on the horizon; namely a decline in temporary housing and greater than expected state and local government job losses. That said, he adds, there are other considerations that could raise hopes this may be a temporary blip. 

First, the bad news though: at 71,000 new positions, the rate of job creation is far below what is necessary to make a dent in the unemployment rolls. It was also below economists’ projections of 90,000 jobs. Thorpe points out that temporary hiring declined by 57,000 positions in July. This is worrisome as temporary hiring is a precursor to permanent payroll hiring. "Up until this point the US economy had added 176,700 temporary jobs to the economy.

This is the first month we have had a decline in this metric after six months of growth,” Thorpe says, adding that he doesn’t know if this is the start of a trend or a seasonable blip. The former, obviously, "would be a huge negative for the economy." He also points to the 55,000 state and local government positions that were cut in July as something to watch. "We knew there would be job losses in this sector given the growing state budget deficits but this decline is larger than expected."

The good news is that, despite rhetoric to the contrary, this recovery is proceeding faster than previous recessions. Also, considering new data that shows the recession’s drop was far deeper than first realized, the improvement that can be seen is an accomplishment.

"We need to keep these numbers in perspective," Thorpe says. Year-to-date there have been 630,000 jobs added. That compares well to the recovery period after the savings and loan crisis and the 2001 recession. At similar points in the last recession--January through July 2002--the economy was still cutting jobs at 636,000 positions. In January through July 1992 only 272,000 jobs had been added." So if anything, he says, the job creation in this recession has been a surprise on the upside. "We know employment always lags and I don’t think one monthly report suggests that the recovery has stalled. Job creation was outperforming historic norms."

The real estate sectors that did well in July, relatively speaking, were retail and industrial. The retail industry added 6,700 jobs while manufacturing added 36,000 jobs. For retail real estate that translates into 180 square feet per position. 

Drilling down into individual markets, the DC area has, again, ridden out another month with minimal pain. The Washington, DC Metro region remains an anomaly, with the massive expansion of the federal government fueling job growth and supporting economic activity in the local private sector, Jones Lang LaSalle’s Scott Homa tells GlobeSt.com. "While still above normal, metropolitan Washington’s unemployment rate of 6.4% pales in comparison to the national average of 9.5%; the stability of government employment and the absence of a large manufacturing sector is helping our area avoid the harsh economic conditions that continue to affect most of the nation," he says.

With business and consumer spending still under pressure and the federal government the main driver of growth in the economy, the need for companies to enhance their government sales efforts and build their presence in DC is taking on greater importance, he continues. "We’re seeing solid growth among government affairs and lobbying groups, which are attempting to capitalize on the massive federal spending that’s occurring in our region. Proximity to power, specifically the decision-makers that are doling out stimulus money and setting new rules and regulations, makes Washington, DC an attractive place now given the scarcity of economic growth occurring in other markets across the country."

Over the past year alone, roughly 25,000 federal government jobs were added in the region, and many sectors of government such as healthcare, intelligence, energy, education and financial regulatory have a lot of growth left in store. "Last week’s decision by the SEC to expand by 900,000 square feet in Southwest Washington will be the precursor to over 800 additional government jobs, underscoring the point that much of the nation’s pain will be Washington, DC’s gain," Homa relates.