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The Economy Keeps on Ticking – September 11, 2023

If you were to compare the current U.S. economy to a franchise movie character, the less accurate comparison would be to a horror movie villain such as Michael Myers or Jason Voorhees, who kept coming back from beyond the grave. A better frame of reference would be Indiana Jones or Rocky Balboa, both of whom showed—in very different settings—they could take a licking and keep on ticking. 

Notwithstanding the lingering impact of the pandemic, which may have permanently altered the role of the CBD in many cities, or the Federal Reserve’s efforts to slow inflation by slowing the economy, our stalwart just keeps getting back up off the ground (or canvas, in the case of Rocky). Consider that August represented yet another month of employment gains, albeit at a slower pace, and household spending rose 0.8% in July, the most recent month for which figures are available. 

Even the Fed appears set to revise upward its projection for the economy. In mid-June, the central bank predicted GDP growth of 1% for 2023, just enough to maintain forward momentum. The updated forecast will follow the next meeting of the Federal Open Market Committee later this month, and it’s widely expected to reflect a 2% increase in GDP. 

A recent Wall Street Journal piece offered an explanation for the economy’s ability to continue absorbing punches and charge ahead: 

First, a growing workforce and slower price increases have boosted Americans’ inflation-adjusted incomes this year, fueling more hiring and spending. 

Second, the pandemic distorted spending patterns, leading to shortages of goods, housing and workers. This created “enormous pent-up demand that has been less sensitive, for now, to higher rates,” according to the WSJ. 

Third, the government initially flooded the economy with cash and held interest rates at near-zero levels, allowing businesses and consumers to lock in lower borrowing costs. Subsequent legislation, including the Inflation Reduction Act and the $53-billion Chips and Science Act, further boosted federal spending and spurred additional private-sector investment in manufacturing. 

With all that going for it, “the real question is why would the economy have capitulated?” Christopher Thornberg, founding partner at Beacon Economics in Los Angeles, told the WSJ. 

Does this mean the Fed’s work here is done? Not necessarily. Although the general sentiment is that the Fed will hold off at the September FOMC meeting, it’s keeping its options open for one more hike in the federal funds rate before 2023 is over. 

After that? Well, the Indiana Jones series always managed at least one good plot twist per installment, but even by that standard, the trajectory of the economy’s story is far less predictable. 

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 16-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 7-10 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).