Increasing bank losses, especially those associated with commercial real estate, will likely hinder the nation’s economic recovery, Bloomberg reported.

And though some economists have said the recession is over, a grim outlook on job growth is also contributing to the commercial real estate market’s woes.

“Because employment growth tends to lag recovery from a recession and because of factors such as small-business credit constraints, my current outlook for employment is one of very slow net job gains once the trend reverses, in all likelihood sometime next year,” Lockhart said. “If this view is correct, this job growth outlook doesn’t help the commercial real estate situation.”

According to the central bank’s Beige Book business survey released Oct. 21, a weak or declining commercial real estate market has been reported by all 12 Fed district banks. And data compiled by Bloomberg shows that commercial real estate loan defaults totaled $110 billion, or 6 percent of all such loans, in the second quarter.

Though Lockhart said at a conference sponsored by the Urban Land Institute that commercial real estate is “very worrisome” for parts of the banking industry, he added that he doesn’t expect the sector to pose a “broad risk to the financial system.”

“Nonetheless, CRE could be a factor that suppresses the pace of recovery,” he said. “As the recovery develops, the CRE problem will be a headwind, but not a show stopper, in my view.”

Going forward, “the overall objective of economic policy should be to bring about a durable recovery and an environment that reduces unemployment as quickly as possible while containing inflationary pressures,” Lockhart said.

“My baseline forecast is for a relatively subdued pace of growth beyond the current quarter and through the medium term,” Lockhart said, adding that weaknesses among banks will likely contribute to the “potential sluggishness of the recovery.”