2024 could be a slower year for the business landscape in the US economy, however, many economists are positive that the US recession could be thwarted with a soft landing.
Bulls made a strong comeback this year in 2023, and as the year ends, the Fed has given major signals of interest rate cuts in 2024. This has kept the markets upbeat and investors bullish on Wall Street. Does this mean that the US economy is completely out of the woods? Well, not entirely as economists share mixed opinions of what’s to come in 2024.
Experts are suggesting that an economic downturn might still be on the horizon, drawing from the same factors that initially predicted a decline in 2023. The rise in inflation has led to the Federal Reserve increasing interest rates, a move that traditionally triggers a recession, defined by two consecutive quarters of negative gross domestic product growth.
Despite unexpected positive economic indicators such as lower inflation and robust consumer spending, some analysts remain cautious about the overall economic outlook. Claudia Sahm, founder of Sahm Consulting and former Federal Reserve economist, expressed surprise at the unexpected economic trends, given the strong performance in various indicators.
A recent survey conducted by MassMutual revealed that 56% of respondents believe the economy is currently in a recession. Looking ahead, the job market might also continue to face challenges, as indicated by data from Challenger, Gray & Christmas, an outplacement and coaching firm. While 29% of companies experienced layoffs in 2023, 21% anticipate the possibility of further workforce reductions in 2024. Thus, it suggests ongoing concerns about economic stability and employment prospects in the coming year.
RBC strategists have based their recession forecast on the evolving economic and business conditions. They outlined six factors supporting their prediction of an impending recession in the first half of the upcoming year.
Optimistic Outlook to Avoid US Recession in 2024
Despite varying opinions, many economists hold an optimistic outlook for the future. Goldman Sachs and Bank of America express confidence in the economy’s trajectory, with Goldman Sachs assigning a mere 15% probability of a recession in the next year.
The Federal Reserve is also optimistic, anticipating three interest rate cuts in 2024. According to a December survey by the National Association for Business Economics, 76% of economists believe the likelihood of a recession in the next 12 months is 50% or less.
While some foresee a mild recession, like Larry Adam, Chief Investment Officer at Raymond James, predicting a potential start in the second quarter, opinions on the timing of a downturn among NABE economists vary, with 40% foreseeing it in the first quarter and 34% in the second quarter.
“It’s poised to be a positive year, although perhaps not as exceptional as 2023,” remarked Mark Zandi, chief economist at Moody’s Analytics. He highlighted the unexpected boost in productivity and labor force growth, factors contributing to robust economic expansion while containing inflation. Anticipated cooling inflation is expected to coexist with sustained wage growth, particularly benefiting low-income households and providing an improved sense of purchasing power in the coming year.
