He also believes that the Fed will succeed in further reducing inflation.
SAN DIEGO – Dr. Mike Fratantoni, chief economist and senior vice president of research and industry technology at the Mortgage Bankers Association, provided analysis of the economy and commercial and multifamily real estate financing markets during an MBA CREF24 panel on economic market outlook. He began by highlighting the prevailing headwinds that are challenging the extraordinary performance the U.S. has enjoyed on the world stage over the past year.
“We expect a downturn in the US economic landscape next year… Observing the views expressed by companies on their spending plans, their production and their service offerings, it is obvious that they are not forecasting robust growth,” he said. Looking at the current inflation figures, he said: “We are in a better position compared to previous periods as inflation rates show a slowing trend.”
Fratantoni noted: “The Federal Reserve aims to further reduce this number, and while we expect it to be successful, achieving this goal may take the remainder of the year due to certain persistent factors affecting inflation.”
The sector where he expects this slowdown to manifest itself most clearly is the labor market. “Although we experienced significant job losses during the pandemic, the subsequent recovery has been exceptional,” he explained. However, there are signs that these employment figures could be revised downwards, he said. “Nevertheless, our forecast assumes that the unemployment rate will be around 4.5% by the end of the year.”
What underscores our expectation that this weakness will continue, he asked, is a closer examination of job growth, which shows that job growth is dependent on a narrow range of industries, chief among them retail, hospitality, government and include the healthcare system. “This limited diversification is a concern,” he said. “In addition, indicators such as job vacancies and hiring rates showed a slowdown, indicating a cautious approach by companies to hiring employees.”
Another point Fratantoni explained was that the banking system continues to struggle with the consequences of the pandemic, leading to strict credit conditions. “Historically, such a tightening of credit in the banking system is associated with the onset of a recession. Although we have not yet reached this point, it is a challenge that we are actively addressing.”
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MBA CREF24 speakers speak on a wide range of topics
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