Let’s start with the good news on the economy, from CRE.Converge 2018 keynote Diane Swonk, Chief Economist and Managing Director, Grant Thornton: “Compared to where we’ve been, the outlook for the U.S. economy is really great!” We’ve come a long way from the thick of the Great Recession 10 years ago, Swonk said, when 2.6 million jobs were lost in 2008 alone.

The U.S. economy is expected to grow about 3 percent this year and the employment rate is at 3.7 percent as of September. Swonk believes we can expect 2019 growth to be good as well. U.S. consumers are spending, although they “took a breather” in September and spending was impacted by the recent hurricanes, particularly Hurricane Florence.

“The housing market can be the canary in the coal mine, and it’s peaking,” Swonk said. “The good news is that it can do that for several years before a recession starts.” One reason for the housing market struggle: A number of young adults are (still) living with their parents. But we shouldn’t be too hard on millennials who have been slow to buy houses, said Swonk; after all, they were the hardest-hit by stagnant entry-level wages, low net worth and high student debt in recent years.

Investments haven’t been as broad-based as we might have expected given the Tax Cuts and Jobs Act, said Swonk. Infrastructure is badly in need of investment across the country, and it’s a solid outlay that creates jobs, but not enough stimulus money was directed that way. Some companies – retailers, manufacturers and more – are feeling uncertain and are thus holding off on projects. “[This holding back] might take a little of the cream off the top of the economy,” Swonk said.

It’s impossible to predict the outcome of the November elections; we could end up with a split Congress. And, it’s possible we heading toward a fall off the fiscal cliff, Swonk said. The Federal Reserve is doing exactly what it has to do to adjust to the economy, but some would argue that it is behind the curve, and reactionary instead of proactive.

“We are not in a marathon of an expansion,” Swonk said, even though at times it might feel like it. “In a marathon, we have juiced the economy with stimulus, but now the Fed is saying, ‘wait a minute, we have to slow down and get over the finish line.’”

“If you ignore a leaky pipe, it’s a nuisance for a while. It’s not a problem until it bursts,” Swonk said. “That’s how trade is. The Fed is reacting to the data; they may have overshot. The Fed is also lifting the ceiling.” The Fed is not the largest buyer of U.S. Treasury bonds but China also can’t play the same role it did as before. China is the second-largest economy in the world. What happens to them impacts everyone.

What other ways could we bring China to the negotiation table besides tariffs? The Trans-Pacific Partnership isolated China but was misunderstood and poorly “sold,” Swonk said. “We’re not the only ones who have been burned by China,” Swonk said, citing the effectiveness of peer pressure in enforcing multilateral agreements, compared to a higher potential for cheating with bilateral agreements. “Our current tactics could force [China] into a slowdown… Driving them into the ground can cause contagion effects, and that’s not the way we want to do it. You want the rest of the world to discipline a rogue player, and we’re not doing that.”

“By 2020, the Congressional Budget Office estimates that the two largest contributors to the deficit will be entitlement spending [like Social Security] and interest expense on the debt,” Swonk said. Some states are seeing emigration along with aging populations; states like Wisconsin are trying to draw in and keep millennials, she said. There is a dearth of middle management from the relatively smaller size of the Gen X population compared to baby boomers and millennials.

Demographic trends are shifting. White men currently make up only 36 percent of the U.S. economy. Younger generations are more diverse and more highly educated, with women outpacing men in their educational attainment.

“There is a real belief in this administration that immigration is bad. We do need immigration,” Swonk said. “By 2020, if we don’t have immigration and keep curbing it, we will have a retraction. We need some form of immigration reform.”

“Diversity is not just about having people who look differently than you – people actually come to different decisions based on a diverse makeup of a group,” she said, whether in a boardroom or on a jury. “The numbers – no matter how you cut it – are changing. You need to embrace it. It affects outcomes once you hit critical mass.”

This post is brought to you by JLL, the social media and conference blog sponsor of NAIOP’s CRE.Converge 2018. Learn more about JLL at www.us.jll.com or www.jll.ca.