Magazine article Journal of Property Management

US Economic Conditions: Point to More Moderate Growth

Magazine article Journal of Property Management

US Economic Conditions: Point to More Moderate Growth

Article excerpt

Despite headwinds coming from the uncertainty generated by events including Brexit and the presidential election, the U.S. economy should continue to chug along with moderate growth, supporting healthy fundamentals in the commercial real estate market.

The U.S. economy has frustrated the market for years because of its inconsistent growth pattern and failure to break out from its middling path. That said, the U.S. has added 14.8 million private sector jobs during a record 76 straight months of positive growth that started in February 2008. As of this past .June, the national unemployment rate was 4.9 percent and the underemployment rate was 9.6 percent, the lowest it has been since the recession ended. Job growth will likely drop from the 200,000-per-month level of the last seven years as the labor force reaches full employment levels, but that change will boost wage growth which, while modest, has been on an upward trend.

Other positive indicators that point to sustained growth: consumer spending is rising moderately without an increase in household debt levels, a sign that purchases are sustainable and not fueled by credit; auto sales remain strong at a rate of 17+ million per year; and oil prices have stabilized in the mid- to upper-$40 per barrel range, which supports increased household income.

There are enough headwinds to create the kind of volatility that fuels worries. Slowing technology company growth raises concerns about the demand in tech-centric metropolitan areas such as Denver, Austin, Texas and California's Silicon Valley. Low commodity prices slow global growth and reduce capital inflows from commodity-rich nations. Markets dependent on mining, especially Houston, are struggling somewhat. Tough new bank regulations have put a crimp in trading activities and profits at financial institutions.

On top of these developments, tepid growth in Europe and Asia has worried global markets, even before the Brexit vote. …

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