NAI Global Outlook: Where Are The Risks and Opportunities?

by Dr. Peter Linneman, PhD, Chief Economist, NAI Global Economoist
The U.S. economy is fairly strong, but key indicators show that it remains well below long-term trend. For example, real GDP is more than $2.6 trillion (12.8%) below the long term trend, while the employment shortfall is at 19 million jobs (11.6%). The GDP gap is equivalent to a shortfall of $8,322 per capita, and in aggregate, exceeds the real GDP of France, the sixth largest economy in the world. The potential to fill this gap depends on the rebound of the housing and auto sectors.

We forecast 2.9 million new jobs in each year of 2015- 2018 (about 2% per annum) and 2.7 million new jobs in 2019 (1.8%). In August 2015, the nation had 3.9 million more jobs than the pre-recession peak of 138.4 million jobs in December of 2007; however, it must be remembered that the population is 17.6 million greater than it was in 2007.

Particularly good news is that economic policy uncertainty is now stabilized near the historic norm.
In the past year, economic policy uncertainty has normalized, as major legislative initiatives such as Obama Care and Dodd-Frank have passed into the rearview mirror. This decline in political economic uncertainty will fuel continued growth. And if only the Fed were to allow rates to reflect market forces, the economy would boom, as normalized interest rates generate the funds required for down payments to buy millions of more homes.

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