The Economic Outlook for 2024: Recession? Probably Not. Vibecession? Definitely.
AFSA Chief Economist Tim Gill has joined the prestigious The Wall Street Journal’s longstanding Economic Forecasting Survey panel. The panel consists of approximately 75 economists from academia, financial institutions, consulting firms, and trade associations who contribute their own forecasts of key economic indicators four times a year, and Gill is one of only 9 trade association economists participating.
The full results of the January 2024 survey, including individual prognostications, as well as the closely watched consensus of all participants, are scheduled to be published January 14. More information on the survey is available here. In the meantime, here are Tim’s calls:
- The economy will avoid a recession in 2024, but just barely. Economic growth is expected to slow nearly to a stall before beginning to regain momentum in 2025. After expanding at an estimated 2.1 percent seasonally adjusted annualized rate in the fourth quarter of last year, real GDP growth is forecasted at less than 1 percent SAAR over the first three quarters of 2024 and to barely exceed a 1 percent SAAR in the fourth quarter. Measured on a Q4/Q4 basis, real GDP is seen sliding from 2.8 percent in 2023 to only 0.7 percent in 2024 before inching upward to 1.8 percent in 2025.
- As economic growth decelerates so, too, will the labor market. Payroll employment growth is likely to remain positive, but average just 50,000 jobs per month over the course of the year. That would measure well below the 225,000 per month increase realized in 2023 and drive the unemployment rate to 4.4 percent by year-end, up from 3.7 percent in December 2023.
- The outlook is not entirely downbeat, however. Price inflation is expected to continue to moderate with the year-over-year change in the headline consumer price index falling from more than 3 percent in late 2023 to 2.8 percent by mid-2024 and 2.5 percent by year-end. Other inflation gauges – including the Fed’s preferred measure, the price index for core personal spending – are also expected to continue downward.
- The Fed has already signaled that lower interest rates are in store and the combination of factors outlined above will lead to looser monetary policy. All told, expect the federal funds rate to end the year 75 basis points lower at the start, with the FOMC launching its rate cut cycle in June.
- A weaker growth and inflation backdrop will also weigh on long-term interest rates. The 10-year Treasury yield is forecasted to slip from approximately 4 percent in early January to 3.5 percent by year-end.
- The “vibecession” will continue in 2024 and consumer sentiment will struggle to approach pre-pandemic levels. Interest rate cuts and continued job growth, if at a much reduced rate compared to recent years, will eventually ease the financial burdens that many households are feeling, but financial stresses will worsen before getting better.
January 11th, 2024
