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What will U.S. economy look like in 2024?

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Sungcheol Jin

By Sungcheol Jin
The author is the business news editor of the Korea Daily.

 

It’s been an eventful year. While Ukraine and Russia are at war, another war broke out between Israel and the Palestinian militant group Hamas in October. A global food crisis, triggered by climate change, has led to a national security crisis, with countries restricting exports of grains and food ingredients, sending international food prices soaring. In March, a series of mid-sized bank failures led to financial turmoil, casting a dark cloud over the economy.

In fact, in the first half of the year, many economists predicted that the U.S. economy would not be able to avoid a recession due to uncontrolled inflation, financial turmoil, and escalating geopolitical crises. But in the third quarter, the economic picture changed dramatically. With economic growth exceeding market expectations and hitting the 5% mark, stocks started to catch fire.

In addition, the hot labor market is gradually approaching normal levels, with the unemployment rate hovering around 3%, which is full employment. Economists, who had been predicting massive layoffs and a recession by the end of the first half of the year, have again raised the possibility of a soft landing, or even a no-landing.

Inflation, which hit 3.7% in September, fell to 3.2% in October, and slowed to 3.1% in November, giving the New York stock market more than a Santa Claus rally in December. November’s consumer data wasn’t bad either, so it’s safe to say it’s been a miraculous year for the economy, especially after Federal Reserve Chairman Jerome Powell hinted at a possible rate cut, adding fuel to the fire.

Economists who predicted a recession have been spectacularly wrong. It’s been a year of what UC Berkeley economics professor Barry Eichengreen, a former senior policy advisor of the International Monetary Fund, called “the age of Hyper-uncertainty.”

Traders react after the closing bell on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., December 13, 2023. [REUTERS]

While the job market, consumer data, and stock markets are doing well, another pillar of the economy, the real estate market, is in decline. While mortgage rates have recently dipped below 7%, they were once as high as 8%, and two out of three homeowners now have mortgage rates below 4%. This gap between current mortgage rates and what homeowners hold is keeping homes off the market. With fewer home transactions, home prices should be going down, but instead, they’re going up.

The real estate sector most at risk is the office market. This is largely due to the rise of the hybrid workforce, which is a mix of in-office and work-from-home. In addition to the financial turmoil in March, refinancing at high-interest rates of 5.25% to 5.50% has become difficult. Recently, there have been many restructurings by large corporations and IT companies, making it more difficult for the office market to recover, according to real estate experts.

There is still a long, dark tunnel ahead for the real estate market.

So, what will the U.S. economy look like in 2024? There are many different forecasts from experts, which means there are many variables.

However, there is a consensus that we will see slow growth, rising unemployment, and slowing inflation. The unemployment rate is expected to rise to 4-5%, and inflation is expected to be around 3%, slightly above the Fed’s 2% target.

Consumption is also expected to contract as consumers have nearly exhausted their excess savings from the stimulus package.

On the other hand, there is a good chance of a rate cut next year, as well as a presidential election. Some experts are predicting a rate cut as early as March next year, but the odds are still in favor of a rate cut in the second half of the year.

To effectively plan your personal finances, you need to pay attention to macroeconomic trends. It’s important to understand the big picture so you can optimize your investment, retirement, and spending plans. Financial planning is not just for the rich.

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