February 27th, 2025 – In today’s uncertain times with tariffs, concerns about inflation and interest rates, it’s increasingly difficult to predict what’s going to happen in any sector of the economy. Experian held a seminar today about Macroeconomic Forecasting and Credit Trends that brought up some interesting points for the economy as a whole and for specific sectors.
Rejection rates for loans remain historically elevated and credit providers are aggressively tightening credit limits on credit card holders. Increases for unsecured personal loans are a sign of economic stress, but increases in auto loans are a positive.
While overall unemployment is low because low wage job creation is strong, that is not the case for higher wage jobs. For those seeking higher paying jobs, it’s taking quite a while to find a new job because hiring for professional/tech jobs is weak. Consumer spending and household net worth is strong. On the other hand, personal savings has decreased and past due balances have increased.
Because interest rates for homes are still high, it is no surprise that first and second mortgages are down, while HELOC’s have increased among Gen Z and Gen Y, likely due to high interest rates. Delinquencies on first mortgages and HELOC’s are both on the rise, but overall things are fairly stable, all things considered.
From 2021 to 2024 we saw the cost for home insurance go up a whopping 54% increase. Also, taxes on residential housing went up 28.8%. As a result of this and other inflationary pressures, consumers disposable income decreased. While consumers started the year with some optimism, inflation has dampened those feelings. If the economy weakens, as some predict it will, it’s possible we could see 2 rate cuts by the Fed in 2025.
Separately, McKinsey reported for the healthcare sector that utilization remains below pre-COVID levels and that Medicare Advantage plans in particular face rising costs linked the the Inflation Reduction Act. They also predicted that Medicare and Medicaid combined will be about 75% larger than the group commercial market by 2028. Specialty pharmacy and GLP-1’s will continue to drive growth for pharmaceuticals.
