While some leading economic indicators show that the Great Recession is over, the statistical evidence provides little solace for millions of Americans already out of work, or for the millions more who worry about job security. The rise in the national unemployment rate to 9.7% in August probably didn't help boost their confidence.

“Things are getting better every day, but I suppose the average person is not going to feel better until he or she sees a big ad in the local newspaper or on the evening news saying XYZ Corp. is hiring dramatically,” says James Smith, chief economist with Parsec Financial Management based in Asheville, N.C.

Here's the good news: The ISM Manufacturing Index climbed sharply from 48.9 in July to 52.9 in August with new orders leading the advance. It was the first time in 18 months that the index posted a reading above 50, which indicates an expanding factory sector.

“The index, which goes back to 1931, is practically perfect for telling us where the economy is going three to six months down the road,” says Smith, who is optimistic that real GDP will grow at an annualized rate of nearly 4% in the third quarter and 3.5% in the fourth quarter.

Demand dries up

As employers continue to shed jobs, however, office landlords across the country are taking a direct hit. Asking lease rates in Orange County, Calif. were 15% lower in the second quarter compared with the same period a year ago. “The rents are being hammered,” says Peter Castleton, a senior vice president in the Anaheim, Calif. office of Voit Real Estate Services. “The incentives, the tenant improvement packages are going up. Commissions for some of these tenant rep brokers are going up, and so are bonuses on a per square foot basis.”

The office vacancy rate in Orange County has climbed from 14.4% to 16.3% over the past year due to weak tenant demand. Through the first half of this year, Orange County posted negative net absorption of 1.5 million sq. ft.

On the investment sales front, the near-term outlook for sellers is grim. Castleton expects that about 6 million sq. ft. of institutional-quality office space will be sold over the next six months, but at a discount of 40% to 50% from peak values reached a few years ago. Maguire Properties, the financially distressed office REIT, announced in early August plans to unload six office properties in Orange County alone.

“When we see offers on projects, we prep our clients and preface the discussion by saying, ‘Don't be insulted,’” explains Castleton. “There is really no such thing as a truly insulting offer today. It's probably 20% to 30% off the asking price, which is already discounted, but we're making deals.”

Walking the trade talk

Until companies start hiring again, any talk of an economic recovery will ring hollow. So, what could be the next growth engine? The passage of a global free-trade pact would be a powerful catalyst, insists Smith, the economist. The Doha Round of trade talks, named after the capital city of Doha in Qatar, began in 2001 to help strengthen poor nations via free trade.

While countries have battled over proposals to cut tariffs and subsidies on goods, negotiations continue. Trade issues will certainly be front and center when Pittsburgh hosts finance ministers and central bank governors for the G-20economic summit Sept. 24 and 25.

“If President Obama were to lock everyone in a room in Pittsburgh and say, ‘You don't get out of town until you all agree with me that we've got to get Doha done by the end of the year,’ you would see a boom in commercial real estate next year,” says Smith. The Peterson Institute for International Economics concluded in a recent study that a Doha trade pact could inject $300 billion to $700 billion a year into the global economy.

Manufacturing, shipping and warehousing activity would accelerate in the wake of a trade pact. “You've got to travel to peddle your goods all over the world, so that would help drive hotels,” says Smith. Additionally, cheaper goods would benefit consumers, boost demand for retail space and generate jobs. “We would get a virtuous circle instead of a vicious circle.”

Such a healthy lift couldn't come soon enough.

Contact Editor Matt Valley at matt.valley@penton.com.

LABOR MARKET STILL AILING

From July 2008 to July 2009, Austin's employment market was virtually flat, but it still was the strongest performer among major metropolitan areas in the U.S.

Five Weakest Employment Markets
Metro Market	Job Losses	% Change
Detroit	-151,500	-8.0%
Phoenix	-145,900	-7.8%
Tucson	-28,400	-7.3%
Charlotte	-63,000	-7.3%
Las Vegas	-59,800	-6.5%
Five Strongest Employment Markets
Metro Market	Job Losses	% Change
Austin	-800	-0.1%
San Antonio	-6,400	-0.7%
Washington, D.C.	-31,200	-1.0%
Oklahoma City	-6,500	-1.1%
Northern N.J.	-13,500	-1.3%
Sources: Marcus & Millichap, Bureau of Labor Statistics