Economists predict much stronger growth in 2024. Here's why
The U.S. economy will see another solid year of growth in 2024, according to a new survey published by the National Association for Business Economics.
An influential group of business economists is feeling more optimistic about the trajectory of the U.S. economy in 2024.
The latest National Association for Business Economics (NABE) survey, published Monday, projects stronger growth, a lower unemployment rate and lower inflation – all of which are components of a "soft landing."
The median expectation is that gross domestic product, the broadest measure of goods and services produced in a country, will rise 2.2% this year. That Is a marked increase from the 1.3% figure that the business economists predicted in their previous survey, which was conducted in November.
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"The NABE Outlook Survey panelists sharply revised upwards their projections for U.S. economic growth in 2024," said Ellen Zentner, NABE president and chief U.S. economist at Morgan Stanley.
The improvement in the forecast reflects "upward revisions to key sectors of the economy," including consumer spending, corporate investment, homebuilding and government spending.
Just one year ago, economists across the board were declaring the economy was headed for a potentially deep and inevitable recession, the result of the Federal Reserve's aggressive tightening campaign.
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Policymakers have raised interest rates sharply over the past two years, approving 11 rate increases in the hopes of crushing inflation and cooling the economy. In the span of just 16 months, interest rates surged from near zero to above 5%, the fastest pace of tightening since the 1980s.
Hiking interest rates tends to create higher rates on consumer and business loans, which then slows the economy by forcing employers to cut back on spending. Higher rates have helped push the average rate on 30-year mortgages above 8% for the first time in decades. Borrowing costs for everything from home equity lines of credit, auto loans and credit cards have also spiked.
However, the rapid rise in rates has not stopped consumers from spending or businesses from hiring, confounding economists.
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The labor market is continuing to chug along at a healthy pace, with employers adding 353,000 new workers in January. Job openings remain high, and the unemployment rate is continuing to hover around 3.7%.
The economy could get a boost later this year if the Fed cuts interest rates as is currently expected. Most experts think policymakers will begin reducing rates in June.
"Most panelists expect the Federal Reserve’s Federal Open Market Committee to commence rate cuts in the second quarter of 2024," said Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas and the NABE survey chair.