MBA Chief Economist Predicts Downturn for US Economy This Year
He also believes the Fed will succeed in further reducing inflation.
SAN DIEGO—During an MBA CREF24 economic market outlook panel, Dr. Mike Fratantoni, Chief Economist and Senior Vice President of Research and Industry Technology at the Mortgage Bankers Association, provided an analysis of the economy and commercial as well as multifamily real estate finance markets. He began by highlighting the prevailing headwinds that challenge the exceptional performance the U.S. has experienced over the past year on the global stage.
“We anticipate a downturn in the U.S. economic landscape in the upcoming year… Observing the sentiments expressed by companies regarding their expenditure plans, manufacturing, and service provisions, it’s evident that they are not projecting robust growth,” he said. In terms of current inflation figures, he said that “we are in a better position compared to previous periods, with inflation rates exhibiting a decelerating trend.”
Fratantoni noted that “The Federal Reserve aims to further reduce this figure, and while we believe they will succeed, accomplishing this objective may take the remainder of the year due to certain persistent factors influencing inflation.”
The sector where he anticipates this slowdown to manifest most prominently is the job market. “Although we witnessed significant job losses during the pandemic, the subsequent recovery was extraordinary,” he explained. However, there are indications that these employment figures might undergo downward revisions, he said. “Despite this, our projection indicates an unemployment rate of approximately 4.5% by the year’s end.”
What underscores our expectation of this weakness persisting, he asked, is a closer examination of the job gains that reveal a reliance on a narrow spectrum of industries for employment growth, primarily encompassing retail, hospitality, government, and healthcare. “This limited diversification raises concerns,” he said. “Additionally, indicators such as job openings and hiring rates have displayed a slowdown, indicating a cautious approach by companies towards recruitment.”
Another point Fratantoni explained was that the banking system continues to grapple with the aftermath of the pandemic, leading to tight credit conditions. “Historically, such a tightening of credit within the banking system aligns with the onset of a recession. While we haven’t reached that point yet, it’s a challenge we’re actively addressing.”
Check back with GlobeSt.com for more from the MBA CREF24 event.