According to top news and analysis from leading economists and market analysts, the US likely avoided a recession in 2023 but faces increasing risks of a downturn in 2024. Key indicators point to slowing growth rather than contraction for the coming year. However, various factors could still tip the economy into decline.
2023 Recession Avoided But Risks Loom for 2024
The US is not currently in a recession, nor is it expected to enter one in 2023, according to expert analysis. The economy showed resilience this year, supported by a still-strong job market.
Unemployment remains very low at 3.7% as of November 2022, indicating continued labor market strength. This is a key factor preventing a 2023 recession.
However, risks are rising for potential contraction in 2024. Economists estimate around a one-in-three chance of downturn next year as rate hikes combat inflation and growth naturally slows from pandemic peaks.
Key Risk Factors
The major recession triggers to watch include:
- Tighter monetary policy: The Federal Reserve raised rates aggressively in 2022 and intends further hikes in 2023 to control inflation. This slows borrowing and spending.
- Supply chain turmoil: COVID disruptions, the war in Ukraine, and other factors strain supplies. Companies cite ongoing struggles with sourcing and inventories.
- Housing declines: The hot pandemic housing market cooled rapidly as rates rose. Further slowing would undermine a key economic sector.
- Unemployment bumps: Layoffs rose in mortgage lending and technology. If wider job losses appear, reduced spending power could spur contraction.
Growth Expected in 2023, Slowdown Likely in 2024
Despite looming risks, the economic consensus expects the US to continue growing in 2023 rather than entering an immediate recession. Growth is likely to slow in 2024, however, as rate hikes catch up with spending.
2023: Most forecasts predict about 1-2% GDP growth this coming year. This indicates continued expansion thanks to robust consumer savings, healthy corporate earnings, and a still-strong job market supporting spending.
2024: Wide-ranging projections estimate 2024 US growth slowing to 0.5-1.5% range. As interest rates potentially peak and fiscal stimulus fades, expanding at a slower pace is likely.
International Bodies, Banks, and Firms Issue 2023-2024 Predictions
- The OECD sees 2023 global growth around 2.2%, then further slowing in 2024. The US fares better than Europe and China next year [1].
- IMF expects 2023 US growth of 1.4%, with risks to the downside. Their 2024 forecast is pending [2].
- Federal Reserve median projection shows 1.0% US growth in 2023 and just 0.5% in 2024 [3].
- Wells Fargo sees “slow and steady” growth for both years thanks to strong household finances [4].
- Morgan Stanley expects “goldilocks” above-trend growth in 2023, then slowdown in 2024 [5].
So while risks exist, the US seems set to keep gradually expanding for now rather than entering immediate crisis. Nonetheless, potential recession triggers bear close monitoring in 2023. Significantly slower growth in 2024 also appears likely.
Policy Support Could Sustain Economy Despite Risks
Both fiscal and monetary policies have pivoted to supporting growth instead of aggressive tightening. This stimulus could help counter risks in 2023-2024, though their impacts remain uncertain.
On the fiscal side, pandemic aid programs boosted savings and enabled debt reduction. The Biden administration champions infrastructure, domestic manufacturing, and green energy investments to promote longer-term growth.
“The economic outlook will depend heavily on policy choices… If policy pivots to support growth, a 2020s structural expansion could continue despite cyclical recession worries in 2023-2024.” – Mohamed A. El-Erian, Allianz Chief Economic Advisor [6]
The Fed likewise shows some willingness to pause or reverse rate hikes if risks materialize. Markets anticipate potential rate cuts in 2024. This flexibility and stimulus could sustain the economy.
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So while risks exist, policy actions represent wildcards that could alter recession odds in either direction for the US economy in 2023 and 2024.
Diverse Opinions Exist on Likelihood and Severity
Economists, investors, firms, and banks show significant divides regarding recession risks, presenting a range of perspectives on potential economic developments.
For illustration, the table below contrasts opinions from major banks:
| Bank | 2023 US Growth | 2024 US Growth | Recession Odds |
|---|---|---|---|
| Goldman Sachs | 0.9% | 1.1% | 35% |
| Morgan Stanley | 2.2% | 1.0% | 31% |
| JPMorgan | 0.7% | 0.3% | 25-35% |
| Wells Fargo | 1.9% | 1.6% | Low |
Goldman Sachs, Morgan Stanley and JPMorgan see elevated risks of a 2024 downturn, while Wells Fargo expects resilient steady growth instead. Wide disagreement continues over both the likelihood and potential severity of declines.
Much depends on inflation trajectory along with consumer and business resilience to rate hikes. Supply chains, the job market, policy impacts, and global factors present uncertainties too. With disparate opinions among top forecasters, economic outcomes remain difficult to predict.
Nonetheless, the balance of evidence suggests the US still appears poised to grow rather than shrink over the coming year. The bigger questions loom for 2024.
Looking Ahead: Consumers Key to Sustaining Expansion
With businesses already cautious amid economic uncertainty, the resilience of consumer demand emerges as the pivotal factor in sustaining growth in 2023-2024.
Households enter this period with unusually high savings and low debt burdens thanks to fiscal support programs during COVID lockdowns. This leaves average families with spending power to prop up the economy even if business investment declines.
“Consumers are still fundamentally healthy. People still have jobs, wage growth remains remarkably resilient… that’s why most economists actually think there’s a pretty good chance we’ll avoid recession next year.” – Bernard Baumohl, The Economic Outlook Group [7]
However, cumulative rate hikes could erode these savings and reduce households’ ability to sustain outlays. If high inflation persists along with rising unemployment, consumers may pull back on major purchases. Such declines would undermine the growth outlook.
So consumers seemingly have the means and motivation to carry the economy through 2023. But their continued resilience cannot be taken for granted if conditions deteriorate. Their spending decisions will shape whether an imminent recession materializes or the US sustains its expansion a while longer.
Final Analysis: Slowdown More Likely Than Disaster
In total, while risks clearly lurk in the background, the collected expert analysis suggests the US still looks likely to keep slowly expanding rather than immediately entering a devastating recession or crisis.
Odds appear low that 2023-2024 will bring utter disaster, financial collapse, or depression-like catastrophe for the economy. But potential for a pullback into more typical cyclical recession remains real, especially in 2024 as the full impacts of tightening unroll.
For now, the consensus leans toward continued muddling growth rather than sudden contraction. But with rising warnings from bankers and uncertainty ahead, all eyes focus on inflation measures, rate decisions, employment trends, consumer resilience, policy responses, and global factors that could alter trajectories.
The US economy showed its mettle defying risks in 2022. But the road ahead remains challenging. Markets brace for a bumpier ride in 2023-2024 even if all-out disaster proves avoidable. Precisely how bumpy depends on how multiple teetering variables play out.
So buckling up makes sense amid the tension between looming recession warnings and plausible optimism that growth endures. Clear skies likely won’t emerge rapidly, but the economy may yet navigate through the storm.
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.
