Where Will The Economy Go In 2024?

Many economists predict a slowing of the economy in 2024, with the chance of a mild recession. Bill Conerly (Forbes.com 12/27/2023), lays out retrospective reasons why we avoided the widely predicted recession in 2023, and the strengths/weaknesses of standard measure used to look forward into this new year. 

The mild to moderate recession for 2023 did not materialize following the Fed’s aggressive interest rate hikes. Conerly points to the increase in demand and auto production thatcountered the normal decrease following rate hikes (Ford posted a 7.1% increase in sales for 2023); the fulfillment of equipment orders above expectations; the continued strong demand for labor (higher than expected job growth in December’s numbers); and the strong consumer spending. All four of these increased instead of the usually anticipated decreases following rate hikes.

Conerly sees enough strength in 2024 from the following indicators to hold off a recession:
relatively flat unemployment claims; a strong stock market; and steady manufacturing orders.
His concerns are the Treasury bond yield curves that have continued to signal a recession.
Additionally, the continued job growth and wage appreciation can be a yellow flag for the Feds
worrying about inflation.

A chart to watch will be the US Leading Economic Index (LEI) from the Conference Board. Their
chart uses data from ten major components of the U.S. economy, assigns a value that fills one
monthly data point. Since early 2023, this point has been below that matched the three
recessions this century. The LEI line bottomed mid-year and has been climbing through most of
the remainder of 2023, while still remaining below their -4.4 danger zone number. The prior
three recessions all started within months of dropping below the line and were much more significant than the 2023 drop. Q1 for 2024 should provide enough data to see if the recovery continues.

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