RSS Feed by Calculated Risk on 1/09/2024 04:08:00 PM
Tuesday, January 09, 2024
Question #3 for 2024: What will the unemployment rate be in December 2024?
Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2024. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I’ll post thoughts on those in the newsletter (others like GDP and employment will be on this blog).
I'm adding some thoughts, and maybe some predictions for each question.
3) Unemployment Rate: The unemployment rate was at 3.7% in November, up from 3.6% in November 2022. Currently the FOMC is forecasting the unemployment rate will increase to the 4.0% to 4.2% range in Q4 2024. What will the unemployment rate be in December 2024?
Six years ago - back when most analysts said the unemployment rate couldn't go much lower - I noted that current demographics shared some similarities to the '60s, and that the unemployment rate bottomed at 3.4% in the '60s - and that we might see the unemployment rate that low or lower in this cycle. That happened, and from a demographics perspective, an unemployment rate below 4% would probably not be inflationary.
Here is a graph of the unemployment rate over time. Note the period in the late '60s when the unemployment rate was mostly below 4% for four consecutive years.
Click on graph for larger image.The unemployment rate is from the household survey (CPS), and the rate was mostly flat in 2023. The unemployment rate increased in December to 3.7%, up from 3.5% in December 2022.
Forecasting the unemployment rate includes forecasts for economic and payroll growth, and also for changes in the participation rate (previous question).
Here is a table of the participation rate and unemployment rate since 2008.
| Unemployment and Participation Rate for December each Year | |||
|---|---|---|---|
| December of | Participation Rate | Change in Participation Rate (percentage points) | Unemployment Rate |
| 2008 | 65.8% | 7.3% | |
| 2009 | 64.6% | -1.2 | 9.9% |
| 2010 | 64.3% | -0.3 | 9.3% |
| 2011 | 64.0% | -0.3 | 8.5% |
| 2012 | 63.7% | -0.3 | 7.9% |
| 2013 | 62.9% | -0.8 | 6.7% |
| 2014 | 62.8% | -0.1 | 5.6% |
| 2015 | 62.7% | -0.1 | 5.0% |
| 2016 | 62.7% | 0.0 | 4.7% |
| 2017 | 62.7% | 0.0 | 4.1% |
| 2018 | 63.0% | 0.3 | 3.9% |
| 2019 | 63.3% | 0.3 | 3.6% |
| 2020 | 61.5% | -1.8 | 6.7% |
| 2021 | 62.0% | 0.5 | 3.9% |
| 2022 | 62.3% | 0.3 | 3.5% |
| 2023 | 62.5% | 0.2 | 3.7% |
Depending on the estimate for the participation rate and job growth (next question), my guess is the unemployment rate will remain in the mid-to-high 3% range in December 2024. (Lower than the FOMC forecast of 4.0% to 4.2%).
• Question #1 for 2024: How much will the economy grow in 2024? Will there be a recession in 2024?
• Question #2 for 2024: How much will job growth slow in 2024? Or will the economy lose jobs?
• Question #3 for 2024: What will the unemployment rate be in December 2024?
• Question #4 for 2024: What will the participation rate be in December 2024?
• Question #5 for 2024: What will the YoY core inflation rate be in December 2024?
• Question #6 for 2024: What will the Fed Funds rate be in December 2024?
• Question #7 for 2024: How much will wages increase in 2024?
• Question #8 for 2024: How much will Residential investment change in 2024? How about housing starts and new home sales in 2024?
• Question #9 for 2024: What will happen with house prices in 2024?
• Question #10 for 2024: Will inventory increase further in 2024?
