The Bureau of Labor Statistics reported on Friday that private sector employment jumped by 268,000 jobs in April, the largest one-month increase in just over five years. The gain was offset in small part by a 24,000-job drop in public payrolls, principally in local and state government. While government employment will remain a drag until cyclical and structural budgetary issues are addressed, the private sector is making slow but steady progress in driving overall gains.
There is still a long way to go, of course, especially as it relates to sustainable commercial real estate demand drivers. Of the 8.8 million private sector jobs between 2008 and early 2010, only 2.1 million have been recovered as of April. The current recovery in the labor market remains the weakest in post-World War II history. At April’s pace, we will return to 2007 employment in 2013; the unemployment rate will normalize much later on account of growth in the workforce.
As for the jobs that the recovery has fomented, gains have been concentrated in areas such as healthcare and administrative support rather than sectors that are associated with high-end office demand. In financial services, for example, 4,000 jobs were created in April. Over the last year, the sector has shed 32,000 jobs. Absent significant new additions to the inventory pipeline, employment in non-residential construction has also continued to decline, albeit it a slower pace than a year ago.
Notwithstanding these qualifiers, the new labor report offered a welcome respite from the recent spate of negative economic reports. Just the day before the April release, the Department of Labor’s weekly unemployment report showed that initial claims surged to 474,000, the highest level since August 2010. The 43,000-person week-to-week spike, attributable in part to auto plant closures, was the largest increase in two years. That result underscores that the outlook remains uncertain and that confidence intervals on fundamentals forecasts remain wider than investment trends suggest.
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