2024 Economic Forecasts: Sunny Days or Overcast in the Next Year?

With 2024 fast approaching, economists are looking ahead to lay out what the next year may have in store. Their forecast shows that a workforce in decline may bring stormy weather to our economy, and may be our biggest economic challenge for the foreseeable future. Why is our workforce declining so quickly? There are several factors behind this, of course, but the largest is the generational shift. Baby Boomers are starting to retire and leave the workplace, and other generations aren’t able to fill all of those job openings. Ideally, each generation would be larger than the last, but Generation X was smaller than the Boomer’s, and Millennials were just a little over the Boomer population, with Gen Z just under Millennial numbers. This uneven generational distribution is now causing trouble for the labor force.

2024 Forecast Highlights:

• Slower consumer spending and a slower economy.

• Slower economic growth.

• The worker shortage will put a floor under how much the economy slows because job openings are going to remain far above the number of unemployed workers.

• Continually growing wages, with the demand for workers outpacing their supply.

• Compound effects of savings being spent down, credit cards spent up, higher interest rates, and lingering inflation will weigh heavily on the economy.

• With inflation above the Fed’s 2% target, it’s unlikely interest rates will be lowered soon.

• It is possible the combined force of these headwinds causes a recession.

• Widespread layoffs are NOT predicted; businesses may keep hiring even as the economy cools – this would mean a recession where there Americans do not experience much economic pain.

Distant Forecast Highlights:

• Once we emerge from that slowdown, the outlook for the U.S. economy is sunny for the remainder of 2024 and into 2025.

• Once inflation falls further and the economy more fully absorbs higher interest rates, it is poised to grow robustly.

• The biggest threat is a severe drop in the office space market. The prices of office space buildings in urban centers have plummeted because of higher vacancy rates and higher interest rates. This is putting their owners and the owners’ lenders in a tight spot and could lead to a credit crunch at regional size banks. These banks are crucial suppliers of credit to small and medium-sized businesses, and they are the largest lenders to the owners of office space complexes. These banks need to cut back on lending as they sort through their losses on office space loans.

• Intensification of the Russia-Ukraine and Israel-Hamas wars, as well as other geopolitical conflicts could destabilize the global economy, which would hurt the U.S. economy.

• Congress still needs to pass a budget for fiscal years 2024 and 2025. It also needs to raise the debt limit before January 1, 2025. Failure to do any of these would mean a blow to the economy.