Calculated Risk: Ten Economic Questions for 2024

Here is a review of the Ten Economic Questions for 2023

Below are my ten questions for 2024 (I've been doing this online every year for almost 20 years!). These are just questions; I'll follow up with some thoughts on each of these questions.

The purpose of these questions is to provide a framework of how the U.S. economy will likely perform in 2024, and if there are surprises - like in 2020 with the pandemic - to adjust my thinking.

1) Economic growth: Economic growth was probably close to 2.6% in 2023. The FOMC is expecting growth of 1.2% to 1.7% Q4-over-Q4 in 2024. How much will the economy grow in 2024? Will there be a recession in 2024?

2) Employment: Through November 2023, the economy added 2.6 million jobs in 2023. This is down from 4.8 million jobs added in 2022, and 7.3 million in 2021 (the two best years ever), but still a solid year for employment gains. How much will job growth slow in 2024? Or will the economy lose jobs?

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?

4) Participation Rate: In November 2023, the overall participation rate was at 62.8%, up year-over-year from 62.2% in November 2022, but still below the pre-pandemic level of 63.3%. Long term, the BLS is projecting the overall participation rate will decline to 60.4% by 2032 due to demographics. What will the participation rate be in December 2024?

5) Inflation: Core PCE was up 3.2% YoY through November. This was down from a peak of 5.6% in early 2022. The FOMC is forecasting the YoY change in core PCE will be in the 2.4% to 2.7% range in Q4 2024. Will the core inflation rate decrease further in 2024, and what will the YoY core inflation rate be in December 2024?

6) Monetary Policy: To slow inflation, the FOMC raised the federal funds rate four times in 2023 from "4-1/4 to 4-1/2 percent" at the beginning of 2023, to "5-1/4 to 5-1/2" at the end of the year. Most FOMC participants expect around three 25 bp rate cuts in 2024. What will the Fed Funds rate be in December 2024?

7) Wage Growth: Wage growth was solid in 2023, up 4.0% year-over-year as of November, but down from 4.8% YoY in 2022. How much will wages increase in 2024?

8) Residential Investment: Residential investment (RI) was slightly negative through the first three quarters of 2023 as the housing market appeared to bottom. Through November, starts were down 9.9% year-to-date compared to the same period in 2021. New home sales were up 3.9% year-to-date through November. Note: RI is mostly investment in new single-family structures, multifamily structures, home improvement and commissions on existing home sales. How much will RI change in 2024? How about housing starts and new home sales in 2024?

9) House Prices: It appears house prices - as measured by the national repeat sales index (Case-Shiller, FHFA, and Freddie Mac) - will be up mid-single digits in 2023. What will happen with house prices in 2024?

10) Housing Inventory: Housing inventory decreased sharply during the pandemic to record lows in early 2022. Since then, inventory has increased, but is still well below pre-pandemic levels. Will inventory increase further in 2024?

Calculated Risk

Sunday, December 24, 2023

Ten Economic Questions for 2024

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