It does NOT include sub-folders of that folder (but see the bullets below). This method searches only the folder you've selected. You can search for a particular message by clicking on the folder where the message is stored, then using the search bar in the upper-right corner of the Outlook window. Quick Search (one mail folder, but can be modified)

Advanced Find (multiple folders, more options).Here are two methods that many find useful. Outlook 2016 for Mac provides searching at various levels of complexity.