Multi-Unit Franchisee Magazine Issue I, 2016 | Page 82
FranchiseMarketUpdate
BY DARRELL JOHNSON
Economy 2016
Slow, doesn’t-feel-good growth persists
W
hat’s the plan for 2016?
While we tend to evaluate economic activity one
year at a time, economic
activity does not function on that type of
clock. Trends stretch across several years and
reveal their implications only when looked
at in the rearview mirror. However, such
trends are important indicators of what is
likely to come next, absent the occasional
exogenous shock. Let’s take a look at them
and see what they suggest for 2016.
We are now approaching seven years
of expansion. This is the sixth-longest economic expansion since the 1850s. While that
should give us pause about 2016, economic
expansions don’t die of old age. They are
usually ended by some event. In the 2000s
it was the housing bubble. Before that it
was the dotcom bust, and before that, real
estate and the S&L crisis.
I am hard-pressed to find a looming
economic shock. No industries look like
bubble candidates. The stock market is
fully valued, but certainly not overvalued. Capacity is well below
pressure levels, hence we
don’t have near-term inflation concerns. Energy and
commodity prices are not
showing any signs of significant moves upward. While we
have unemployment levels
near what most economists
consider full employment, we
are not seeing wage pressures
at the lower skill levels, and
only modestly so at the higher skill levels.
I believe significant components of why
are 1) the formal labor numbers do not
reflect the real pool of job seekers, and 2)
we have a big misalignment of skills versus
job openings.
Perhaps the foundation for a continuing
expansion lies in how poorly this ^[