The United States economy has rebounded strongly from the Covid-19 recession, aided by a heavy-handed government policy response. Since the pandemic hit, the U.S. economy has grown by 5.4%. Every year comes with a range of economic challenges, and 2024 is likely to be no different. As Kavan Choksi Wealth Advisor says, while the .S. economy is strong by all objective measures at the moment, like easing inflation and robust GDP growth, the consumer sentiment is decidedly weak.
Kavan Choksi Wealth Advisor briefly highlights what to expect from the United States economy in 2024
If inflation continues its moderating trajectory over the coming quarters in 2024, there is a good chance that The Federal Open Market Committee (FOMC) will start to gradually normalize the policy rate. About 25 bps cuts at each meeting beginning in June are expected, bringing the Fed Funds target range to 4.00%-4.25% at the end of 2024. At the same time as, quantitative tightening or the Fed’s balance sheet runoff program, is expected to be maintained at the same pace through 2024. At $95 billion per month, quantitative tightening is expected to remove around $1 trillion from the economy in the year.
The consumer spending growth is projected to slow in 2024, after maintaining a pretty firm pace in 2023. There are multiple reasons for this, ranging from plateauing wage gains and diminished excess savings to low savings rates and less pent-up demand. Moreover, the restarting of student loan repayments and the increase in subprime auto and millennial credit card delinquencies, are major signs of stress among certain consumers. However, debt servicing levels and household balance sheets do remain healthy. The tight labor markets continue to support employment and hence better income levels. On the whole, consumer spending growth is expected to stay positive in 2024, but at a lower rate than 2023.
As Kavan Choksi Wealth Advisor points out, the fiscal deficit almost doubled to $1.84 trillion—7.4% of GDP—in fiscal 2023 from $950 billion in 2022. It is fairly clear that the federal government took in a lot less cash than it sent out, even though the full extent of the year’s deficit expansion would not be considered stimulus in a classic sense. Coming to 2024, the federal deficit is expected to narrow to a still very large 5.9% of GDP, so as to reflect belt-tightening on the spending side, partly offset by higher interest outlays on government debt.
In the year of 2024, momentum in the job market is expected to wane, with modestly rising unemployment and slowing payroll growth. A decline in quit rates is also expected. Elevated immigration patterns and labor force participation over the past year have added labor supply, while shorter work week indicates to a moderating demand for labor. Taking into account the challenges to add and retain workers coming out of the pandemic, companies could be more reluctant than normal to shed workers in a slowing economic environment. However, even so, less hiring activity may cause the unemployment rate to tick up to the mid-4% area by the end of 2024 due to worker churn.