Many experts predict a “soft landing” for the economy.
Many economists are forecasting a “soft landing” for the U.S. economy in 2024. While there are still areas of concern, inflation has eased, consumer spending has trended positively, and job growth has continued at a steady pace. Looking ahead, economic strength will be bolstered as the Fed announced it is likely done with rate hikes and has forecasted three rate cuts this year. The labor market outlook for 2024 can be described as being relatively stable with continued normalization, following the recent pandemic-era volatility.
The labor market has been relatively steady and should continue in 2024.
The labor market remained solid in 2023, with continued growth and steady expansion. However, the end of the year experienced some moderation, which is expected to continue in 2024. While job growth is forecasted to be positive, the rate of growth will be at a slower pace compared to recent years. The tightness in the labor market can be partially attributed to the shrinking labor force as many baby boomers continue to retire. Although there are still pockets of concern, especially with a wave of tech layoffs in early January, the overall labor market should remain steady throughout 2024.
Job Growth Exceeding Expectations
Unemployment remains low but is expected to see an increase over the next 12 months.
After the post-covid rebound in 2020-2021, the U.S. unemployment rate has been remarkably low, holding steady in the mid-3% during 2022 and 2023. According to the Congressional Budget Office, the unemployment rate is forecasted to increase to 4.4% by the end of 2024 before leveling off in 2025. Another metric worth noting is the labor participation rate, which essentially re-set itself in 2020, from approximately 63% pre-covid to 60% immediately post-covid before slowly increasing to its current level of 62.5%.
Unemployment Rate Remains Low
Inflation has been normalizing and is expected to hit the Fed’s stated goal of 2% this year
After reaching its modern-day high at 8.8% in mid-2022, the nation’s inflation rate began a slow and steady descent, ending 2023 at 3.3%. The sudden rise gave consumers less buying power, which contributed to lower levels of personal savings and increased credit card debt. As a result, the Fed raised interest rates 11 times during the 2022-2023 cycle. Most forecasts expect the nation’s inflation rate to hit the Fed’s publicly stated goal of 2% by mid 2024.
Inflation is Inching Back Toward Target
GDP growth will be lukewarm to begin 2024 but will stabilize by year-end
Although year-over-year GDP growth accelerated to end the year in 2023, the trend is expected to shift in early 2024 with weakened consumer spending, slowing wage growth, and a lukewarm business investment ecosystem. GDP growth is projected to be slightly negative during the second and third quarters of 2024, followed by slow growth during the back half of the year and steady increases in 2025 and 2026. This forecast is largely due to a tepid start to the year and potential volatility in the economy. While a soft landing is still expected, it will take a few quarters before the economy becomes relatively predictable and sustained GDP growth is realized.
U.S. GDP Growth Remains Solid