We can all relax about the economy next year

The Future. Despite the negativity surrounding the 2023 economy, things have turned out better than expected. The “looming recession” never arrived, pandemic-disrupted supply chains straightened out, inflation cooled, labor shortages waned, and consumers kept opening their wallets. While the US economy hasn’t returned to normalcy just yet, it appears to be healing from the chaos set in motion by the pandemic, inflation, and war. If the last four years have proved anything, it may be that there’s never a 100% chance of anything.

Clearer skies ahead
Many economists feel cautiously optimistic about the 2024 economy, reports Vox.

• Recession odds are lower, as Goldman Sachs thinks that the economy is on its “final descent” to a soft landing, where inflation returns to the Fed’s 2% target.
• Three interest rate cuts might be on the horizon, if the Fed continues to like what it sees.
• Inflation is supposed to cool even more, with prices in some areas expected to decline — even though most won’t go back to what they were in 2019.
• Wages are anticipated to increase at a rate faster than inflation, if the jobs market stays strong, so people’s buying power should improve.
• Mortgage rates have dropped below 7%, sparking some hopefulness around the housing market.

Not across the finish line
By the middle of 2024, Americans should know whether the economy has gotten a soft landing or not. “Definitely by this time next year, we’re either landed, or we’re in a recession,” Claudia Sahm, a former economist at the Fed, told Vox.

Bringing inflation back down to 2% while maintaining a strong labor market (and avoiding greater macroeconomic issues) isn’t outside the realm of possibility, but it would be unprecedented, Andrew Patterson, senior international economist at Vanguard, also told the publication. No matter what, he foresees some job loss, which will “come with some pain.”

Fingers crossed for a soft landing.