Speaker Quinn.

The New York City Council passed a bill today that prohibits employers from considering an applicant's current employment status when making hiring decisions.

The bill would also put an end to job ads that say applicants must be currently employed. Under this measure, New York would be the first city in the country providing people with the opportunity to sue on the basis of unemployment discrimination.

“Imagine spending every day and night for months upon months upon months looking for a job–only to be told ‘don’t even bother … unemployed need not apply,’” said Council Speaker Christine Quinn, who supported the bill. “We cannot–and will not–allow New Yorkers who are qualified and ready to work have the door of opportunity slammed in their faces.”

The Council cited that 51 percent of unemployed New Yorkers have been job-hunting for over six months, but many job listings require candidates to already be employed.

Mayor Michael Bloomberg, whose signature is required to codify any City Council-approved bill into law, has vowed to veto this one, according to Metro.

Hizzoner called it "one of the most misguided pieces of legislation" and claimed it would "damage lots of small businesses" to Capital New York.

Whatever side of the argument you're on, the city has an unemployment rate of 8.8 percent, according to the Bureau of Labor Statistics, and that's a lot of people who need all the help they can get.

Adjunct professor burn

Eric Auld is 26-year-old with a Master's in English, a couple lists on McSweeney's, and a job as an "Adjunct Lecturer in English."  And yet, like a male version of the characters in Girls, he cannot get a full-time employment in New York City.

So after applying to hundreds of job listings on the Internet, Mr. Auld conducted an experiment "to find out more on where I stood in this uncertain job market." He did this by creating a fake job listing for an Administrative Assistant on Craigslist. And then writing about it on Thought Catalog, home of semi-employed Adjunct Professors of English everywhere.

His results were enlightening? Sort of? He had 653 replies, which he then sorted into a coffee-stained pie charts of experience and level of schooling. He finished by concluding that people on Craigslist should apply for jobs the moment they go up, and that no one cares about your resume, and also adjunct professors have way too much time and are terrible at conducting research experiments.

This story was fascinating enough to get him on NPR, home to all Associate English Professors.

But what we found most useful in this study were the "conclusions" of the article's commenters...

Cassidy Turley research guru Robert Sammons on private-sector job gains and the Manhattan office market:

What double-dip recession? What jobless recovery? There has been so much doom-and-gloom economic rhetoric circling the globe lately that the new jobs numbers just released by the City Comptroller’s Office appear, on the surface, to be totally contradictory. Figures for 2011 through July show that New York City has added 73,500 private sector jobs, though this number is, as always, subject to revision. And, more than likely we will see that revision as education positions were up a whopping 13,300 in the month of July alone and are sure to be adjusted lower as the year moves along.

That said, when education is taken out of the mix all together, the city still added some 6,000 private-sector jobs during the month.

And it wasn’t just July that saw a bump in the numbers, either, as the city has gained private-sector jobs each month in 2011--as few as 1,200 in May and as many as 21,800 in January. But there have been chinks appearing in the New York’s armor with both banking and securities dropping jobs for the last three months in a row. Professional services, though, has rocketed higher; and information services, after a couple of down months, has turned the corner and is now positive for the year. Even the dear, old real estate sector has added jobs in five of the last seven months.

Of course, jobs numbers are not forward looking and, if better economic news doesn’t appear on the horizon soon, the local figures are bound to weaken.

A winter of discontent coming?

The summer our discontent behind us, the weight of inaction threatens anew. It is readily apparent from the most recent data that economic growth and labor market trends slowed markedly during July and August. Yet precious little has been accomplished over this same period to seriously assess or offset the deficiencies in the recovery.

Absent politicians in Washington calming down, or new private or public sources of stimulus, the near- and medium-term outlook for the economy remains clouded. Would that policymakers could approach the growth and employment conundrum with the same zeal—and occasional ferocity—as they approached the budget debates over the past few months, we might be in a stronger position two years after the recession reached its putative end.

Growth and Jobs

In the waxing days of summer, leading indicators of economic and labor market activity were generally improving, albeit at a frustratingly slow pace. In a late-May column for The Commercial Observer, I wrote that “the near-term outlook is still clouded by an unusual degree of uncertainty … this summer will prove critical in narrowing that uncertainty along several dimensions, including the direction of policies related to monetary interventions.” As for the potential of a budget impasse to upend the recovery, I hypothesized that “a failure on the part of Congress to reach a compromise will derail the economic recovery.”

In the months that have followed those assessments, the buffeting of consumer and business confidence by a dysfunctional policy environment at home and a recalcitrant debt crisis in Europe have brought growth to a standstill. Data for August, in particular, show that downside risks to the recovery remain real concerns and that we cannot dismiss the possibility of a relapse into recession.

The most recent estimate of second-quarter G.D.P. growth shows the economy expanding at an annualized rate of 1 percent. That falls short of the level required to motivate an uptick in private-sector hiring. Nor does it suggest improvements in local, state and federal revenues of an order that will alleviate the structural crises in public finance.

Second-quarter personal consumption expenditures registered their smallest contribution to growth in two years, with increases in spending on services undercut by a drop in auto purchases. Private investment increased at a moderate pace. Declining government spending, principally at the local and state levels and in federal nondefense areas, was a drag on growth.

For commercial real estate investors and lenders, the headline growth statistics are secondary to the data on jobs. Corporate profits in the second quarter were observably higher than during the prerecession peak but have not fueled hiring. Last Friday’s employment report showed the extent of businesses’ reservations toward ramping up expenses.

As expected, state and local government shortfalls are forcing cutbacks in these subsets of the labor force. At the federal level, and apart from current negotiations relating to the budget, public-sector payrolls will come under increasing pressure as the Postal Service edges closer to default. Without sufficient funds to meet September and October obligations—including a $5.5 billion prefunding contribution for retiree health benefits and a $1.2 billion payment for workers’ compensation, according to the National Association of Letter Carriers—large downward adjustments in federal jobs may be just around the corner.

Controlling for government cutbacks, but including the impact of 45,000 striking Verizon workers, the establishment data show that private payrolls expanded by just 17,000 jobs, the weakest result since February 2010. One month does not constitute a trend, so let us return things to their broader context: there were more American jobs 10 years ago, in the middle of the 2001 recession, than there were last month.

An understanding of sector-specific employment trends can be instructive when assessing the commercial real estate outlook. Geographically, states like Texas have outperformed the national trends. The Northeast has also recouped losses, while large parts of California, the Midwest and the Southeast are continuing to struggle. In some of the industries that are most closely associated with office space demand, the trends are nuanced. Professional and business service jobs have rebounded, but a large part of the increase has been in administrative and temporary services. At the national level, financial services employment has stagnated.

What’s Gone Wrong and How to Fix It

The assessment of the faltering jobs recovery is cannon fodder for today’s political ideologues. That is deeply regrettable. Many businesses leaders report that uncertainties stemming from current legislative and regulatory priorities have made it difficult to invest in new employees or capital. And while productivity gains have slowed, uncertainty regarding the outlook for demand is also tempering firms’ hiring decisions.

Consumers are constrained in driving aggregate demand because of indebtedness and limited access to new credit. A healthier job market might support consumer activity, but the circularity of household consumption and employment is self-reinforcing.

To trigger a virtuous cycle, policymakers might turn their attention to reducing businesses’ hiring and employment costs. But such directed efforts will not, by themselves, spur new hiring if the entropy of the public-private interface does not abate. For an administration and Congress that are viewed as increasingly ineffectual and prone to puerile squabbling, committing to a sense of normalcy in the balance of government and private roles will be as important as any active policy interventions.

dsc@chandan.com

Sam Chandan, Ph.D., is president and chief economist of Chandan Economics and an adjunct professor at the Wharton School.

­

Indulging the Dismal Science

The Bureau of Labor Statistics reports that private payrolls expanded by just 57,000 jobs during June, the smallest increase since May 2010. An uptick in the unemployment rate, to 9.2 percent, was blunted as more than 400,000 Americans exited the labor force.

Important real estate market barometers, including construction employment, reported declines, as did several office-using employment sectors, including financial activities. At the national level, there are fewer jobs in financial activities than a year ago.

These latest results are consistent with a recovery that has struggled to develop momentum. As compared with the employment peak in January 2008, 8.8 million jobs were lost and 1.8 million have been recovered.

The characteristics of the newly created jobs are also an issue. In June, roughly 60 percent of net new private employment was in the leisure and hospitality sector. These relatively low-wage jobs were a drag on aggregate measures of compensation, pushing average wages lower across all private workers in June.

Should We Anticipate Less?

The jobs report coincides with a swath of just-released data relating to second-quarter rent and occupancy trends. With the exception of apartments, where the unique relationship to owner-occupied housing remains exceptionally favorable to rental fundamentals, other commercial property sectors showed signs of slower gains as compared with earlier in the year. Given the capriciousness of what drives absorption, the fundamentals reports come as no surprise.

Absent stronger labor market outcomes and a rise in business confidence, the outlook for fundamentals will remain mixed. That presents a challenge for investors, given that capital inflows and prices have diverged from the weaker cash-flow drivers of value, especially in large markets.

Particularly, as interest rates rise from their historic lows, which now comprise a central pillar of the investment and lending market’s current buoyancy, property values will come under increasing pressure absent more robust net absorption.

As for whether employment growth will accelerate, opinions vary on the magnitude and timing. To the extent that uncertainty on key policy issues—including the federal budget, taxes, financial reform and health care reform—are constraining otherwise profitable businesses from moving forward with payroll expansion, outcomes are within the scope of our influence. Other factors elude our control, raising concerns that the “normal” rate of unemployment may have risen permanently.

Some Labor Economics

While the normal rate of unemployment is an ambiguous concept, the Congressional Budget Office currently estimates that the conceptually related Non-accelerating Inflation Rate of Unemployment (NAIRU) has risen from 4.8 percent before the recession to 5.2 percent. In a recent brief from the Federal Reserve Bank of San Francisco, economists Justin Weidner and John Williams suggest that the new normal is even higher [1], though it may prove temporary:

… mismatches in the skills of workers and jobs, extended unemployment benefits, and very high rates of long-term joblessness, may be impeding the return to “normal” unemployment rates of around 5 percent. An examination of alternative measures of labor market conditions suggests that the “normal” unemployment rate may have risen as much as 1.7 percentage points to about 6.7 percent …

Messrs. Weidner and Williams’s reference to a deficiency in the matching process is supported by other research, which also shows that growing businesses are challenged in filling open positions. As job openings have risen, employment has failed to keep pace.

The Federal Reserve Board’s Regis Barnichon and his colleagues study the issue in a recent analysis of the Beveridge curve [2], which maps the negative relationship between the job-openings rate and the unemployment rate. While cautioning against inferences relating to the natural unemployment rate, they find that most of the current breakdown in the Beveridge relationship can be attributed to a declining vacancy yield—the ratio of hires to open positions, which is observable across industries. Changes in labor force participation and frictional unemployment, other reasons for movements in the curve, appear less relevant at this juncture.

What Next?

Wavering confidence in the private market’s capacity to deliver strong and consistent job gains—irrespective of the reasons—are feeding calls for more support from Washington. But if the policy and market uncertainty stemming from government intervention is part of the drag on business hiring, another round of short-term programs may prove counterproductive.

An editorial in this weekend’s New York Times correctly points out that it is difficult to quantify the impact of broad policy decisions that are not directly related to employment costs on business hiring. With respect to the budget talks, it goes on to state, “There is still time for the president to insist that the debt talks include a substantial program to put people to work now, while reducing the deficit over a longer period.”

In assessing the risks of such a program, we must consider that the private sector and our international creditors could interpret a major departure from fiscal discipline in a different light, undermining their confidence in us rather than bolstering it.

dsc@chandan.com

Sam Chandan, Ph.D., is president and chief economist of Chandan Economics and an adjunct professor at the Wharton School.

1. Justin Weidner and John Williams: What Is the New Normal Unemployment Rate? Federal Reserve Bank of San Francisco Economic Letter, February 14, 2011, 2011-05.

2. Regis Barnichon, Michael Elsby, Bart Hobijn, and Aysegul Sahin: Which Industries Are Shifting the Beveridge Curve? Federal Reserve Bank of San Francisco Working Paper Series, December 2010, 2010-32.

Now the bad news: Washington is considering new banking rules that could very well strangle the city's economic recovery. Senators Charles Schumer and Kirsten Gillibrand are leading the effort to stop overregulation, but it's not clear whether they will be successful.

Last year's Dodd-Frank reform bill required U.S. banks to implement changes, including new collateral requirements, in dealing with derivative transactions. The new rules are to be the subject of congressional hearings in Washington next month.

The unfairness of the Dodd-Frank rules is clear. While U.S. banks would have to abide by the new regulations, banks based elsewhere would not. That will put the city's great financial institutions--JP Morgan Chase, Morgan Stanley, Goldman Sachs and others--at a huge competitive disadvantage. These institutions, of course, happen to be the financial engines that drive the city's economy.

If they can't compete in the global marketplace, the city's economy surely will suffer. The unemployment rate--still too high--inevitably will increase to double digits.

New York's two senators and its congressional delegation need to remind their colleagues that it would be foolish indeed to impose unfair rules on a vital sector of the nation's economy. It's a shame, though, that the argument has to be made in the first place.

Investors are understandably encouraged; the new counts mark the strongest monthly gains for the U.S. labor market since March 2006. Apart from its significance for the nation's employment picture, the new data also suggest that American businesses have been relatively unshaken by the past month's macroeconomic and geopolitical events.

In each of these respects, the labor market headline is both welcome and decidedly positive. Still, the gains must be qualified when assessing their implications for property markets and the risks to their sustainability.

Slow but Accelerating Gains

Businesses have added more than a half-million jobs to the economy in the first three months of this year. That compares favorably with last year, when private employers created fewer than 100,000 jobs per month on average.

Improvements on the order of the past two months' gains would have been implausible a year earlier, given the fragility of the recovery and the drags on business confidence. While uncertainties related to policy developments remain significant, aggregate demand has been improving to a degree that is now fomenting an expansion of payrolls.

Aside from opacity around the business environment, productivity gains over the past two years have tempered the expansion of payrolls as demand has picked up. In the business sector, year-over-year output per hour increased by 6.6 percent in each of Q4 '09 and Q1 '10. Since then, however, productivity gains have slowed in each consecutive quarter, declining to just 1.8 percent in Q4 '11. Nearly two years since the recession's end, a stronger economic outlook has combined with these more moderate productivity gains to encourage more meaningful hiring.

Across Occupations, Uneven Gains

The headline employment trends beckon optimism, but there is still a ways to go. By most measures, we remain mired in the slowest jobs recovery in modern American history.

Of the 8.8 million private-sector jobs lost during the downturn, only one in five has been regained. Historically, we have returned to the previous employment peak within three years of the initial inflection. The unemployment rate, a crude measure of the labor market's health, has fallen but may increase as a larger number of discouraged Americans re-enter the workforce.

Of particular concern for property investors, improvements in the labor market have been rather imbalanced. Significant payroll gains have been measured in some areas of durable-goods manufacturing, including the auto sector. In the service sectors, wholesale and retail trade employment has increased year-over-year, as has employment in transportation.

In professional and business services, gains have been concentrated in administrative support and temporary help services. Some of the largest and most consistent payroll increases over the course of the recession and the ensuing period have happened in the areas of health care and social services. Forty-five thousand jobs were added in these sectors in the past month alone, accounting for almost one in four net new jobs in March.

Unsurprisingly, local government payrolls are contracting as part of an adjustment that will take some time to be fully realized. Construction employment also remains weak. Across general and specialty trades, employment in residential construction continues to decline. Non-residential employment is rising slowly from its nadir, driven by a small uptick in current and planned multifamily housing development activity. Financial activities employment increased by 6,000 jobs in March, but has failed to show signs of consistent improvement, extending its decline on a year-over-year basis.

Important Qualifiers

Has the labor market reached a turning point, developing sufficient momentum across a broad enough swath of industries to propel higher absorption outside the apartment sector? There are still several reasons why property investors must remain circumspect.

Apart from anemic office-using trends, overall wage pressures remain weak, limiting growth in salary income even as broad price indices rise. Job openings remain subdued, even for this point in the cycle, and many unemployed Americans will face challenges in retooling for growth areas in the labor market. Business confidence is still sensitive to changing conditions in the domestic policy environment and the potential for new macroeconomic and geopolitical shocks. Instability in the Middle East and North Africa, a further deterioration in sovereign bond markets in Europe and spillover from economic disruptions in Japan all remain credible threats to sustained growth in the United States.

While recent developments have shown few signs of dampening the recovery, they have served to re-emphasize the need for deliberate hiring and capital investment choices amid a recovery that remains fragile even as it shows signs of accelerating.

As a result, the overall thesis holds: Property investors with heady expectations for job growth and space absorption must still contend with the possibility that stresses on cash flow may increase before they abate.

schandan@rcanalytics.com

Sam Chandan, Ph.D., is global chief economist of Real Capital Analytics and an adjunct professor at the Wharton School.

To a very significant degree, the health of the building sales market in New York has been strengthened by two factors; first, an acute supply-demand imbalance where there are significantly more people looking to purchase investment properties than there are properties for sale; and, second, an extremely accommodative interest-rate environment. Many believe that the low-interest-rate environment is an overriding factor creating the positive conditions in the sales market today.

If you are a frequent reader of Concrete Thoughts, you know that I consistently point to the fact that there is no metric that has a more profound impact on the underlying fundamentals of commercial and residential real estate than employment. While this remains a fact, job growth, or shall I say the appearance of job growth, is a potentially double-edged sword.

An increase in the number of jobs is certainly good for the economy. As American consumers become employed, they increase consumption. This is a vital part of our economy, which is 70 percent consumer-driven. As jobs increase, demand for residential and commercial space increases. Additionally, upward pressure should be exerted on wages, adding to the disposable income of U.S. consumers.

The other edge of the sword is that the appearance of job creation could lead the Fed to begin to tighten interest rates. If interest rates rise, mortgage lending rates will rise. As lending rates rise, capitalization rates will rise, exerting downward pressure on real estate values.

Tangible job increases will have a very positive impact on the economy and enable the marketplace to absorb modest increases in interest rates. If, however, the job increases appear to be there but are overestimated, this could lead to a tightening of rates without real underlying fundamental enhancements.

Let's take a look at what the current data is telling us.

ast Friday's report showed a very positive net gain of 216,000 jobs. There were 230,000 jobs created in the private sector, which were offset by 14,000 jobs lost in the government sector. The unemployment rate dropped from 8.9 percent in February to 8.8 percent in March. This drop represented the fourth consecutive monthly decline; the unemployment rate has dropped 1 percent since November 2010.

Some of the articles that I have read recently indicate that "discouraged workers are now returning to the job market." However, of the 1 percent decrease in the unemployment rate, it has been projected that 0.8 percent is due to actual employment hiring and 0.2 percent is due to a contraction in the labor force. This indicates that discouraged workers are not coming back looking for work in the numbers that some people have indicated.

To the extent that the Fed interprets this job data overly optimistically, it is likely that it will allow its $600 billion program to purchase assets to expire on schedule in June. It is thought that the Fed would adopt a neutral policy moving forward, under which it wouldn't begin tightening until further positive jobs data is collected.

The latest jobs gain comes on the heels of February's 192,000 gain and appears to be very positive. But let's take a closer look.

The jobs recovery that we have had thus far has remained one of the weakest on record coming out of a postwar recession, as the U.S. employment level is still about seven million jobs below pre-recession levels. Even if the job market was to see consistent gains, similar to those achieved in March, it would take eight years to get back to pre-recession employment levels.

Additionally, due to the significant slack in the jobs market, wages remained flat at $22.87 an hour. Uncharacteristically, wages have been essentially flat for the past six months, despite consistent month-over-month job gains. If, however, we take into consideration that, on a year-over-year basis, wages have increased by 1.7 percent and inflation has increased by approximately 2 percent, real wages have actually declined by more than 1 percent on an inflation-adjusted basis. This dynamic has created consumer discomfort and increased the expectation of future inflation.

THESE CONDITIONS ARE emblematic of a recovery that has been fueled, to a significant degree, by an exceptionally forgiving monetary policy. For about 28 months now, the Federal Reserve has kept interest rates at or near zero levels and has accompanied this with unprecedented asset purchases to keep bond rates low. This has been an extraordinarily positive dynamic for our commercial real estate capital markets, as lending rates have remained at or near historic lows. However, the implications for the broader economy may not be so positive.

Looking further into the jobs market, the number of Americans who have been out of work for 27 weeks or longer remains extremely elevated, at more than 6.1 million people. Long-term unemployment is only a 10th of 1 percent below its peak level. Long-term unemployed, as a percentage of all unemployed workers, has risen to 45.5 percent from 43.9 percent.

Additionally, the relatively low employment rate of 8.8 percent is due in large part to the fact that the labor force has been shrinking steadily. At present, 64.2 percent of Americans are working or are looking for work. This so-called "participation rate" is the lowest in 25 years and well below the peak of 66.4 percent before the recession. In March, this participation rate was unchanged, indicating that discouraged workers were not encouraged to get back into the job market.

Our 8.8 percent unemployment rate compares favorably with the 10.1 percent rate in late 2009. Local government positions have shrunk significantly; there have been 416,000 jobs lost in local government since peak employment levels in September 2008. In March, this sector shed another 15,000 jobs, and it is expected that over the next year or two, local government employment will continue to shrink as municipalities have to bridge budget deficits.

So why aren't companies hiring more? Profitability and productivity have both increased substantially, and today a record $1.8 trillion sit on corporate balance sheets. Clearly, employers have the ability to hire; however, they are choosing not to based upon strategic decision making. The reasons for this caution are numerous and exist on the domestic as well as international fronts.

On the domestic front, it is yet to be seen whether federal, state and local governments can actually control spending. To the extent they cannot, taxes will need to increase to meet budget deficits.

The real impact of the Dodd-Frank Financial Reform Bill is yet to be seen, and corporations need to determine how to maneuver around all of the new requirements in that regulation. Add to this the fact that no one in the country can accurately tell what the real cost of health care expenses will be moving forward. However, it is clear that they will continue to rise. As we see more and more "favored groups" of the Obama administration obtain exemptions from the new health care bill, the burden of paying for the 35 million newly covered citizens shifts disproportionately to
those without the benefit of exemptions.

Lastly, our tax policy has been set, but only for another year and a half before we are likely to have another political battle over the magnitude of our tax obligations.

On the international front, there are several factors that could impact the health and pace of our economic recovery. The European debt crisis still looms very large, and recent uprisings in the oil-rich Middle East render elusive any comfort about predicting energy costs moving forward. Japan's crises could significantly impact the broader economy, and the fact that several trade agreements seem to be going nowhere will have a negative impact on the U.S.'s ability to increase exports.

LASTLY AND MORE importantly for the U.S. job market is the answer to the following question: How reliable are these Department of Labor statistics? The way the government measures job growth is heavily biased toward reporting employment booms in the spring. This happens nearly every year, so why should we believe that 2011 is any different?

The complete guesswork surrounding what is called the Birth/Death Model is included in almost every month's employment figures. This is essentially an educated guess as to how many new companies might have been formed in a particular month and the resulting jobs that might have been created from these new companies.

In 2009 and 2010, this guesswork caused the Labor Department's figures to be highly inaccurate. In 2009, for example, more than 900,000 jobs had to be removed from its count, given inaccuracies of Birth/Death Model projections. In 2010, the jobs statistics were inflated by nearly 400,000 positions. Springtime optimism is the main reason these projections have been overstated.

It is likely that in April, May and June, we will continue to see this impact inflate the job-creation numbers beyond what they actually are. To the extent that the Fed acts on these numbers and begins to tighten monetary policy prematurely, it could slow the economic recovery and would have a significantly negative impact on the commercial real estate sector.

To the extent that job gains are real, however, the industry would gladly accept stronger employment numbers and modest increases in interest rates.

Compared with the sluggishness of the national employment market, in New York we have fared relatively well. As of February, the last month of available data, New York State's unemployment rate was 8.2 percent, down from 8.8 percent year-over-year. In New York City, the unemployment rate is 8.9 percent. Remarkably, during this past recession, the city lost only about 160,000 jobs, compared with 320,000 jobs lost in the recession of the early 1990s. Since January 2010, 53,000 of these jobs have been recovered. All things considered, New York City is doing much better than the nation as a whole.

A notable exception to the city's strength appears in the Bronx, where the unemployment rate continues to climb. In January 2010, the borough's rate stood at 12.5 percent, and has since increased, currently sitting at 12.7 percent. Why policy makers fought against the Kingsbridge Armory development, which could have produced 2,000 full-time jobs for the borough, remains perplexing given these higher unemployment rates. But in a borough where elected officials prefer "no jobs" to jobs they feel aren't "good enough," perhaps they like leading the city in one category, even if it is unemployment.

rknakal@masseyknakal.com

Robert Knakal is the chairman and founding partner of Massey Knakal Realty services and in his career has brokered the sale of more than 1,125 properties, having a market value in excess of $7 billion.

Office employment for New York City was up by a revised 24,600 positions for 2010, from the original estimate of 21,500, in figures released this month by the city comptroller. With a total of 38,500 private-sector jobs added in 2010, 64 percent were in the office-using sector, dramatically higher than the previous full post-recession recovery years of 1993 (40 percent) and 2004 (33 percent) in the city.

Further good news: For the latest reporting month of January 2011, another 5,400 desk jobs were added. There are now a total of 1,181,000 office-using positions in the city, up from the recent recession low of 1,150,600 in November 2009, though still well off the 1,298,400 recorded in January 2001.

There was job creation across a wide variety of fields, including business services and finance, though still somewhat depressed in the real estate and information sectors. The securities industry, which is crucial to the New York economy, made the most dramatic turnaround within the revised numbers, jumping by 6,200 positions in 2010, up from the original estimate of 100 losses.

Additionally, another 2,000 jobs were added in January. With this trend expected to continue (albeit at a measured pace), watch for higher rents for office space as the vacancy rate shrinks and plans for new commercial buildings in Manhattan are announced.

realestate@observer.com

These headline gains, while welcome, have mixed implications for commercial real estate; improvements remain uneven, with employment in areas such as financial and retail services lagging gains in education, health care and administrative and temporary services. Across industries and occupations, earnings and salaries are only just outpacing inflation.

While underlying improvements in the economic outlook suggest an acceleration of payroll gains in 2011, headwinds from domestic policy uncertainty and from global macroeconomic and geopolitical instability are weighing on firm hiring decisions.

Creating Jobs, but Not Fast Enough

Employers have a long way to go in replacing the 8.7 million jobs lost in 2008 and 2009. Since January 2010, employment has increased by just 1.2 million jobs, measuring the slowest progress in the labor market's recovery following any post-World War II recession.

For most of the past year, the absence of robust payroll growth has followed from slack in the utilization of currently employed workers and strong gains in productivity. In recent economic history, these are typical features of a recovery in the labor market that lags the broader economy's emergence from recession.

But exacerbating the expected lag in payroll gains, businesses have been navigating a more complicated route in the current recovery, managing uncertainties around the regulatory and policy environment and, more recently, an increasing incidence of mismatch in required skill sets and the skills present in the unemployed labor pool.

Job openings remain extremely low by any historic norm, but have been increasing in recent months. In many of the sectors that are most crucial for a recovery in spending and direct space demand, hiring has not kept pace.

Where the Jobs Are

Clear trends are emerging in some segments of the labor force, often reflecting broader macroeconomic, fiscal and demographic trends that are driving the demand side of the employment equation. The trends are not always positive.

Consistent with the enormous budgetary challenges facing many state and local governments, public payrolls declined in February. Federal payrolls were unchanged over the month, with a decline in postal service jobs offset by an increase in non-postal federal workers. State employment declined by 12,000 jobs; local government employment by 18,000. While these losses may not bear directly on demand for office space, public payrolls remain a key component of overall employment across virtually every metro area, including New York City.

Outside of public payrolls, gains were reported for both goods and services employment. Non-residential construction employment extended its downward trend, falling by 2,000 jobs in February. But non-residential specialty-trade-contractor employment increased by almost 17,000 jobs and is now slightly higher than a year ago.

In the service sector, retail employment fell by 8,100 jobs in February. Losses were reported at furniture and home furnishing stores, electronics stores, building material and home improvement stores and department stores, among other categories.

Professional and business services employment increased by 47,000 jobs in February. Management and technical functions reported increases, but the gains were concentrated in administrative and temporary services, which accounted for more than 36,000 net new jobs.

In areas that are more directly relevant for prime office-space demand, the results have been consistently disappointing. Information services reported no increase in jobs in February. In the financial services sector, employment fell by 2,000 jobs over the month; and this sector has almost 50,000 fewer jobs than a year earlier. While many financial institutions have reported robust recoveries in profit levels, these gains have yet to translate into an observable improvement in the sector's overall employment levels.

Headwinds to Job Growth

All things being equal, the most recent data on the performance of the economy and business sentiment suggest that hiring should accelerate modestly over the course of 2011. The consensus estimates suggest that payrolls at midyear may be expanding at a fast enough pace to offset new entrants to the labor force, reining in broader measures of unemployment.

But headwinds to the baseline outlook remain pervasive. Apart from policy uncertainty and concerns about how monetary interventions will ultimately give way to a tightening bias, ongoing disruptions to global geopolitical and macroeconomic stability are constraining businesses that might otherwise move full force in growing their payrolls. The recent unrest in the Middle East and its impact on oil prices have served to reemphasize the need for deliberate hiring and capital investment choices amid a recovery that remains fragile even as it appears to accelerate.

As a result, property investors with heady expectations for job growth and space absorption must contend with the real possibility that stresses on cash flow could increase before they abate.

schandan@rcanalytics.com

Sam Chandan, Ph.D., is global chief economist of Real Capital Analytics and an adjunct professor at the Wharton School.