by Calculated Risk on 12/02/2025 11:34:00 AM

It was almost thirteen years ago when I wrote "The Future's so Bright …" I noted that I was the most optimistic since the '90s, and that things would only get better.

I pointed out that housing starts would increase significantly over the next several years, that state and local governments would start hiring again, that the budget deficit would decline sharply, and that household deleveraging was nearing and an end.

As I noted in January 2013: "There are several tailwinds for the economy, and the headwinds (like household deleveraging) are mostly subsiding."

Now these tailwinds have subsided. The significant growth for housing starts, new home sales and vehicle sales, is behind us.

With the exception of data centers, commercial real estate is struggling, and some sectors - like hotels - are in recession.  The Architecture Billings Index (ABI) has been in contraction for 35 of the last 37 months, suggesting a slowdown in CRE investment well into 2026.

And the Federal budget deficit is increasing sharply.

Fortunately the unemployment rate is still historically fairly low (but increasing), and household debt service and financial obligation ratios are low. 

I was also positive on demographics too, but unfortunately with less immigration and more prime age deaths, the demographic outlook isn't as favorable as a several years ago.

And we haven't addressed some of the longer term challenges I mentioned thirteen years ago:

There are a number of longer term challenges from rising health care expenditures, climate change, income and wealth inequality and more, but I remain very optimistic about the longer term too. There is a constant focus on the aging population, but by 2020, eight of the top ten largest cohorts (five year age groups) will be under 40, and by 2030 the top 11 cohorts are the youngest 11 cohorts. The renewing of America! And these young people are smart (less exposure to lead is a significant story), and well educated too.

Note: Here is an update on demographics through 2024.

Unfortunately recent policy choices have made the long term challenges more difficult.  But I'm still optimistic that those issues will be addressed.

I'm not currently predicting a recession (although I'm watching), and I expect further growth in 2026, but the near term future isn't as bright now.