Local Market Monitor, a National REIA preferred vendor, recently released their monthly National Economic Outlook where they share their thoughts on developments taking place in the U.S. economy.
National Economic Outlook
By Ingo WInzerApril, 2024
The US population increased one half percent in 2023. This is a bit better than during the Covid years when over a million Americans died, but well below the 1 percent rate that was standard for decades before 2010. While Covid may still have some residual effect, population growth had already slid for a decade even before the pandemic. There’s a good chance, therefore, that future growth will look a lot like what we have now.
A slow rate of population growth isn’t necessarily bad but it probably puts a cap on how fast we can expect the economy to grow. Since 2000 the ratio of economic growth to population growth is 3 to 1; so with population increasing at a half percent, future economic growth may average no more than one and a half percent a year. Remember that 70 percent of the economy is consumer spending.
Slower growth will affect real estate markets directly because there will be less need for more housing but also because the financial attraction of investing in real estate is based on the idea that future demand will be strong.
Then there’s the possibility that the slide in population growth isn’t over. Other large economies, like Japan and Germany, have reached population stagnation. The US economy is built on the idea of constant growth, powered by an expanding domestic market.
In March, the total number of jobs increased 1.9 percent over last year, mainly due to big gains of 4.5 percent in healthcare and 3.0 percent in government. Those gains, however, probably won’t last because they represent post-pandemic rehiring at nursing homes and state governments, respectively. Once that restocking is completed, the sustainable rate of total job growth may be closer to 1 percent.
Jobs were up 3.6 percent in construction, 0.2 percent in manufacturing, 0.7 percent in retail, 0.8 percent in finance, 0.7 percent in business services, and 1.7 percent at restaurants.
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