Marcus & Millichap

Economic Outlook

Summer 2016

Access Full Report Subscribe

Extended Expansion Cycle Remains on Track,
But Questions of Sustainability Mounting

The current economic expansion has run for 84 months through June, prompting discussions on how much fuel remains in the tank. A calendar, however, and the age of the cycle in itself will not induce a downturn. Key segments of the economy, including the labor market, consumer spending and the availability of credit for businesses, remain positive forces capable of driving additional expansion despite volatility in other areas. A choppy pattern of growth that has prevailed throughout the cycle has had an unintended but positive tempering effect. The modest pace of expansion, combined with a healthy level of risk aversion, has greatly minimized the threat of bubbles developing and largely eliminated the need for policy prescriptions to avert potential overheating. A range of headwinds continue to weigh on the pace of economic growth and nurture uncertainty, but the economy continues to reiterate moderate growth capable of driving commercial real estate performance.

The U.S. labor market provides the clearest indication that the economy remains healthy despite an easing pace of growth, although the pace of growth has eased. Job gains have averaged nearly 200,000 per month over the past five years as openings hover near an all-time high. Still, a worrisome weakening in job additions, possibly due to labor force limitations and skills misalignment, has begun to surface. Unlocking the dynamics of converting openings to hires could be a hurdle for the economy, especially with unemployment below 5.0 percent.

Access Full Report Subscribe