CALABASAS, CA—Domestic economic growth since the trough of the Great Recession has not been spectacular, but it has been steady. This slow-but-steady momentum has generated its own form of tailwind, and—to coin another aeronautical metaphor—has created a long runway for the current cycle. That's the key takeaway from a discussion of the economy by Marcus & Millichap's John Chang that set the stage for the company's recent webinar on the outlook for the office and industrial sectors.

Notwithstanding the volatility caused by economic uncertainty in Europe—in particular, Greece—and China, “If we look at growth trends, we're in the 75th month of an economic growth cycle,” said Chang, first VP, research services at MMI. “Interestingly, that's exactly how long the last growth cycle lasted in total. So we're already extending beyond the last growth cycle.”

One factor differentiating the current cycle from previous recoveries, said Chang, is that “we didn't have a huge run-up. We didn't have a huge bounce at the onset, and periodically the economy takes a breather and you can see that that growth rate will dip down, perhaps going negative for a quarter or going close to zero. What that's doing is actually tapping the brakes on the economy and spreading out that growth cycle. So we have a lot of positive momentum behind it.”

Although consumption remains strong, it's now backed by a “steady rise” in consumer confidence, albeit a level that “bounces around on a month-by-month basis,” said Chang. Similarly, job growth, while remaining positive, has waxed and waned on a month-to-month basis.

“But when you look at it on a quarterly basis, it's actually been a pretty steady pace of growth over the past four or five years,” said Chang. “We're looking at that trend to continue; we've added about 12.6 million jobs this cycle, which more than outpaces the 8.7 million jobs we lost during the recession. But just as importantly, it's stronger than the 8.2 million jobs we added during the last cycle.”

Furthermore, the job growth has become broad-based, not tied to one market or one sector. Annualized wage growth is now at 2.2%, up from the 1.7% level at which it had been stuck for the past couple of years.

On the subject of some numbers remaining constant while others fluctuate, Chang noted that while corporate profits have been in the range of $525 billion for the past few years, corporate investment into growth has come back down. The most recent reading showed 3% corporate spending on expansion and new equipment, down from the average of 5.5% over the past year. Since this figure averaged about 6% during the last cycle, the current 3% level shows some uncertainty and “a little extra caution” on the part of corporations.

One area which does point toward expansion is job openings. As present there are 5.7 million job openings, “the most since the Bureau of Labor Statistics started tracking this 15 years ago,” said Chang. However, companies are taking longer on hiring decisions now, averaging 29 days to make an offer compared to the long-term average of 24 or 25 days.

Part of this is a mismatch between the job opening's requirements and the prospect's skill set, Chang said. That being said, we've seen in past cycles that as openings become more numerous and companies become more aggressive about their growth, “they stop looking at the skill sets of the prospective employees and they start looking at potential and at training employees. That's where we're going to see the momentum on wage growth pick up.”

The one-hour webinar delved into office and industrial occupancy and investment sales trends, with Chang joined by Alan Pontius, SVP, commercial property groups at MMI; Ashley Powell, SVP at Bentall Kennedy and incoming president of NAIOP; and Bill Hughes, SVP, Marcus & Millichap Capital Corp. On-demand replays of the webinar are available by clicking here.