9 things that will define the economy in 2024

Inflation, as measured by the headline Consumer Price Index, slowed significantly this year, falling from 6.3% year-over-year in January to 3.1% in November. This comes after inflation peaked in June 2022 at over 8.9%.

A slowdown in price increases for food, energy, and goods has gotten inflation down to within reach of the Federal Reserve's 2% target. It's likely that pressures on housing prices may ease into next year, according to the White House.

While prices of durable goods fell 2.2% in October compared with the year prior, many Americans are still feeling the effects of rising prices for shelter, clothing, and groceries. Shelter prices — or housing — are up 5.5% year-over-year in November, while rent is up 6.5%. Groceries rose 1.7% year-over-year in November, while food at restaurants and bars was up 5.3%. Apparel overall is up 1.1% year-over-year — and up 2.8% for men's and boys' apparel.

The Fed raised rates four times in 2023, which have held steady since July with a benchmark borrowing rate between a target rate of 5.25%-5.5%. The Fed indicated three rate cuts coming in 2024 in hopes of bringing the Fed funds rate down to 2%-2.25% by 2026.

Though the Fed funds rate may have peaked, it's impacted other rates such as credit card interest rates and mortgage rates. Credit card interest rates are at a record-high 20.7% according to Bankrate.

Meanwhile, 30-year fixed mortgage rates are slightly under 7.5%, making it more difficult for new homebuyers. Estimates reveal it has never been more expensive to buy a home.

Members of the Federal Open Market Committee don't agree on the number of rate cuts coming in 2024 — two anticipate none, while four expect four cuts.

"We don't believe we've seen the full extent of tighter policy yet translate to economic conditions, and as the Fed remains on hold in the near-term and inflation moderates, there will be a decent amount of passive tightening imparted on the economy," Seery Grein told BI, referring to attempts to decrease the amount of money supply in the economy.

2023 saw sustained job growth, but at rates slower than the last two years. This year, the economy added an average of 232,200 new jobs each month — about 55,000 more a month than in 2018 and 2019. These jobs were in sectors including healthcare and social assistance, leisure and hospitality, and government.

Since early 2022, the unemployment rate has stayed relatively stable between 3% and 4% — even amid rising interest rates. Last year, many economists expected that raising rates in order to bring inflation down would require the unemployment rate to spike.

The Congressional Budget Office predicts the unemployment rate will rise slightly next year to 4.4% in the fourth quarter, still low by historical standards.

The share of prime-age workers with a job or on the job hunt is at 83.3%, about the highest percentage since 2002. The participation rate for women hit a record high at 77.8%.

This all suggests people should not feel too concerned about maintaining their current employment, as inequality in the job market continues to improve.

In late 2022, many economists and forecasters predicted negative real US economic growth for 2023. Instead, per the White House, the Blue Chip Economic Forecast projects GDP growth of 2.6% for 2023, thanks in part to an increase of 5.2% in the third quarter.

GDP growth in 2023 stemmed in part from strong consumer spending despite still-high inflation on retail goods and services. The personal consumption expenditures (PCE) price index was 2.6% higher in November 2023 than the year prior — and it fell in November from the previous month for the first time since April 2020. Month-over-month change in consumer spending for 2023 has been positive for every month except in March.

Economic growth was also sparked by increases in manufacturing investment — in the third quarter, private manufacturing construction investment hit a record-high level, the highest since 1958.

US economic growth is expected to slow in 2024, though. Leading banks and economists put GDP growth numbers for next year mostly between 0.5% and 2%. J.P. Morgan forecasts a conservative pace of expansion at 0.7%, while the Conference Board puts estimates at 0.9%. The CBO projects economic growth to slow to 1.5%. Though GDP is a closely watched measure of a recession, the two consecutive quarters of falling numbers is not the official definition.

"Our conviction around recession is not as high as it once was, and what we see most clearly is that 2024 is going to be a sluggish year for growth," Seery Grein said.

The "vibecession" may be winding down — consumer sentiment is rebounding per the University of Michigan's Survey of Consumers and the Conference Board's Consumer Confidence Survey.

The University of Michigan Index of Consumer Sentiment increased 13.7% month-over-month in December — and 16.6% over the last 12 months, bringing levels back to those in July.

"December's increase in consumer confidence reflected more positive ratings of current business conditions and job availability, as well as less pessimistic views of business, labor market, and personal income prospects over the next six months," said Dana Peterson, chief economist at the Conference Board, in Wednesday's release.

Still, many Americans are worried about the economy, especially given the things that impact them the most, like the cost of groceries or rent, which are still elevated. According to a November CNN poll of nearly 1,800 people, 84% said they're at least somewhat concerned about the economy — 43% said they're very worried.

Trends such as the "silent depression" reveal a discrepancy between larger economic variables and how Americans feel about their financial situations.

Given a sweeping majority of Americans are at least a little concerned about the economy, the economy could play a major role in swaying people's opinions ahead of the 2024 presidential election.

On September 1, federal student-loan interest resumed after a three-year pause, while payments began in October. As of June 2023, federal student loan debt was a combined $1.64 trillion, held by 43.6 million people and averaging to around $38,000 per borrower.

Just 7% of borrowers had over $100,000 in student-loan debt as of the third quarter, whereas more than half had under $20,000 to pay off, per Wells Fargo.

The resumption of payments meant that for many borrowers, the extra repayment obligations stripped away from other spending or saving. Millions have seen reductions in their financial buffer in case of emergencies.

Nearly nine million student-loan borrowers missed their first payments in October — about 40% of those who entered repayment a few months ago. Despite thousands receiving debt cancellation through fixes to the Public Service Loan Forgiveness waiver and income-driven repayment plans, millions of others are struggling to make ends meet while paying off their debt.

Though Biden's first attempt at broad student-debt relief failed in 2023, his administration is trying an alternate route to loan forgiveness for a narrower group of borrowers. Though borrowers could have an answer on coming relief in 2024, it likely won't be implemented until 2025.

The US is outpacing much of the G7 countries, an economic forum of seven of the world's most advanced economies in terms of inflation and GDP. The year-over-year inflation rate in the US ranks third in the G7 behind Italy — at 1.7% as of October after falling from 5.3% in September — and Canada at 3.1%. In October, Japan, France, and Germany were all below 4%, while the UK was at 4.7%.

In the third quarter, the US had by far the largest GDP growth at 1.2% compared to the previous quarter. The next highest is France at 0.1%, while the remaining countries did not record growth or shrank. Since the fourth quarter of 2019, the US also blows away the G7 in terms of GDP — the US grew 7.4%, while second-place Canada was at 3.5% and Italy was at 3.3%.

As real wages grew, lower-income Americans began to close the gap with higher-earning Americans. In November, real wages grew 0.8% year-over-year, and it was most pronounced in the lower income percentiles, in part due to the growth of union efforts and an ongoing labor shortage in lower paid industries such as hospitality. Per the White House, wages among the 90th percentile of earners, when compared to the 10th percentile, declined by 6% year-over-year.

2023 was also a record year for the employment rates for Black Americans compared to white Americans, according to the Council of Economic Advisors. There is still plenty of work to do to close the racial wage gap — Census data reveals in 2022, the median household income for white Americans is around $81,000, compared to just under $53,000 for Black households and $62,800 for Hispanic households.

The child poverty rate also remains a concern, as it more than doubled from 5.2% in 2021 to 12.4% in 2022, or about nine million children, according to recent Census Bureau data. This is comparable to the overall US poverty rate. Many women are being forced to leave the workforce as the average US childcare cost is $10,000 a year.

Taylor Swift began her Eras Tour in March, while Beyoncé's Renaissance World Tour ran from May to October. While their music attracted millions of fans, they also taught Americans a thing or two about the economy.

Many consumers spent thousands of dollars on concert tickets and travel to attend events, in part contributing to a 4.4% increase in year-over-year prices for admissions to movies, theaters, and concerts. Many were willing to fly across the country or around the world to see these artists, a surprising trend given rising inflation rates. A similar, though not as extreme, phenomenon occurred with the release of films including "Barbie" and "Oppenheimer."

TikTok was at the center of some economic trends including "girl dinner," consisting of meals made from affordable or leftover ingredients, which likely saved some people hundreds of dollars on food costs. The New York Times linked girl dinners to broader economic trends toward embracing thriftiness, particularly surrounding food as prices remain elevated.

ChatGPT also made headlines for its ability to make people more productive — and its threatening aura to take jobs away. While many economists are unsure just how much AI software could impact the job market, many believe it could increase productivity and generate additional revenue for companies.