Signs suggest that the U.S. economy is already in a recession – and may have been so for 10 to 12 months, according to Michael Eisenga, CEO of First American Properties. He warned that businesses and consumers should prepare for a challenging year ahead.
Eisenga cites many signs of economic distress. “The downward revision of key economic indicators, along with rising unemployment expectations and a dramatic pullback in CEO confidence, clearly point to a contracting economy,” he said in prepared comments.
He noted that the real estate market—both commercial and residential—is among the sectors most affected. CRE loans are becoming negatively leveraged because of falling property values coupled with high interest rates, expenses, and vacancies. The residential market is being hammered by high interest rates and downward price pressures, making it hard for buyers to get financing.
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Eisenga cited other signs of trouble. The Conference Board’s consumer confidence index plunged 7.2 points to 92.9 in March, while it found a 9.6-point drop to 65.2 in Americans’ short-term economic outlook – the worst reading in 12 years. On top of that, two-thirds of respondents to a University of Michigan survey predicted unemployment would rise this year, in line with the job cuts and layoffs accelerating in many sectors and an ominous sign given that numbers above 60% have always signaled a recession.
Eisenga also identified industries in difficulty. Discretionary spending on services, dining out, and vacations is slowing, and travel to destinations like Las Vegas has fallen 1.1% year-over-year.
“Financing is becoming increasingly difficult to secure, and as access to capital for business tightens, cost-cutting measures, including layoffs, are expected to escalate,” Eisenga stated.
He noted that discount retailers like Dollar Tree have reported lower demand for basic consumer staples due to financial strains. "With rising input prices squeezing profit margins, companies find it harder to pass on costs to consumers, reducing retail sales. I expect we will see 3 to 4 rate cuts in 2025, with the prime rate potentially falling to between 5.5% and 6.25% by the end of the year," Eisenga predicted.
He added that the Fed might accelerate its rate-cutting measures if the economy hits the 4.4% unemployment target by its next meeting in May.
Eisenga urged businesses and consumers to prepare for a challenging year ahead as the economy faces continued pressures.
Also, it's worth noting that the Federal Reserve Bank of Atlanta has predicted that GDP will be negative 2.8 percent in the first quarter.
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