Multi-Unit Franchisee Magazine Issue I, 2016

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 ^[

Multi-Unit Franchisee Magazine Issue I, 2016 | Page 82