MBA's Fratantoni: "You Have to Start with Demographics"
The U.S. economy is entering a new phase defined by demographic change, regional divergence, and deepening uncertainty across global markets, according to Mike Fratantoni, Chief Economist at the Mortgage Bankers Association. Speaking at the MBA Economic and CREF Market Outlook, Fratantoni said the forces that once fueled consistent growth are shifting in ways that will reshape future performance.
"You have to start with demographics," he noted, emphasizing that population trends—long a reliable tailwind—are beginning to lose strength. Millennials are now well into their 30s, while Generation Z represents a smaller cohort, and tighter immigration policies are further constraining growth. These changes, he said, will alter how demographic factors influence the broader economy in the years ahead.
Regional dynamics are also diverging. Fratantoni pointed to continued migration from high-cost coastal cities to the Mountain West and Southeast, a shift that began before the pandemic but has since accelerated. That movement, he said, is contributing to a patchwork of local economic performance across the country.
Technology is adding its own layer of complexity. Fratantoni cited artificial intelligence as an evolving factor that could transform credit and risk assessment but also heighten uncertainty as regulation lags behind innovation. "There is a heightened level of uncertainty," he said, noting that economic models are struggling to keep pace with rapid AI developments.
While national growth remains roughly in line with long-term trends, the data reveal uneven underlying conditions. Consumer spending is concentrated among higher-income households, leaving other sectors more exposed to potential shocks. Meanwhile, financial markets are behaving differently than they have in previous periods of turmoil: rather than flowing into the U.S. dollar, recent global uncertainty has pushed more investors toward gold as the dollar loses some of its traditional dominance.
Labor conditions, Fratantoni observed, reflect cautious sentiment on both sides of the employment equation. Job growth has slowed, hiring remains muted, and measures like job openings and quits are declining. The slowdown is more pronounced in regions such as California, Washington, Nevada, and the Washington, D.C. area, while Sunbelt markets continue to add jobs. New graduates, in particular, face a more challenging job market.
Rising consumer debt is another pressure point. Households are carrying heavier loads of student loans, auto loans, and other debts, eroding some financial resilience even as affluent consumers continue to spend.
Fratantoni also warned that trade policy remains a wild card. Tariffs have not yet driven inflation as sharply as once predicted, but they are affecting commodity prices and global trade flows, especially with China. "The tariff impact still has the potential to throw a wrench in things," he said, though he added that the overall U.S. economic track remains stable.
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Source: GlobeSt/ALM