fundamentals have caused a sharp deterioration in the credit quality of cre loans on banks'books and of the loans that back commercial mortgage - backed securities ( cmbs ). pressures may be particularly acute at smaller regional and community banks that entered the crisis with high concentrations of cre loans. in response, banks have been reducing their exposure to these loans quite rapidly in recent months. meanwhile, the market for securitizations backed by these loans remains all but closed. with nearly $ 500 billion of cre loans scheduled to mature annually over the next few years, the performance of this sector depends critically on the ability of borrowers to refinance many of those loans. especially if cmbs financing remains unavailable, banks will face the tough decision of whether to roll over maturing debt or to foreclose. see board of governors of the federal reserve system, fdic, office of the comptroller of the currency, and office of thrift supervision ( 2008 ), " interagency statement on meeting the needs of creditworthy borrowers, " joint press release, november 12. see board of governors of the federal reserve system ( 2009 ), " federal reserve board makes announcement regarding the supervisory capital assessment program ( scap ), " press release, november 9. recognizing the importance of this sector for the economic recovery, the federal reserve has extended the talf programs for existing cmbs through march 2010 and newly structured cmbs through june. moreover, the banking agencies recently encouraged banks to work with their creditworthy borrowers to restructure troubled cre loans in a prudent manner, and reminded examiners that – absent other adverse factors – a loan should not be classified as impaired based solely on a decline in collateral value. 5 the job market in addition to constrained bank lending, a second area of great concern is the job market. since december 2007, the u. s. economy has lost, on net, about 8 million private - sector jobs, and the unemployment rate has risen from less than 5 percent to more than 10 percent. 6 both the decline in jobs and the increase in the unemployment rate have been more severe than in any other recession since world war ii. 7 besides cutting jobs, many employers have reduced hours for the workers they have retained. for example, the number of part - time workers who report that they want a full - time job but cannot find one has more than doubled since the recession began, a much larger increase than in previous deep recession

for growth next year rather than a significant drag, as has been the case for the past several years. prospects for nonresidential construction are poor, however, given weak fundamentals and tight financing conditions. in the business sector, manufacturing activity has been expanding and should be helped by the continuing strength of the recovery in the emerging market economies, especially in asia. as the recovery takes hold, enhanced business confidence, together with the low cost of capital for firms with access to public capital markets, should lead to a pickup in business spending on equipment and software, which has already shown signs of stabilizing. i have discussed two of the principal factors that may constrain the pace of the recovery, namely, restrictive bank lending and the weak job market. banks'reluctance to lend will limit the ability of some businesses to expand and hire. i expect this situation to normalize gradually, as improving economic conditions strengthen bank balance sheets and reduce uncertainty ; the fallout for banks from commercial real estate could slow that progress, however. jobs are likely to remain scarce for some time, keeping households cautious about spending. as the recovery becomes established, however, payrolls should begin to grow again, at a pace that increases over time. nevertheless, as net gains of roughly 100, 000 jobs per month are needed just to absorb new entrants to the labor force, the unemployment rate likely will decline only slowly if economic growth remains moderate, as i expect. the outlook for inflation is also subject to a number of crosscurrents. many factors affect inflation, including slack in resource utilization, inflation expectations, exchange rates, and the prices of oil and other commodities. although resource slack cannot be measured precisely, it certainly is high, and it is showing through to underlying wage and price trends. longer - run inflation expectations are stable, having responded relatively little either to downward or upward pressures on inflation ; expectations can be early warnings of actual inflation, however, and must be monitored carefully. commodities prices have risen lately, likely reflecting the pickup in global economic activity, especially in resource - intensive emerging market economies, and the recent depreciation of the dollar. on net, notwithstanding significant crosscurrents, inflation seems likely to remain subdued for some time. the foreign exchange value of the dollar has moved over a wide range during the past year or so. when financial stresses were most pronounced, a flight to the deepest and most liquid capital markets resulted in a marked increase in the dollar. more recently, as financial