February 15, 2024

Economic outlook

The widely forecasted recession didn’t materialize last year, and there is growing optimism that the economy will remain stout in 2024.
Resilient is the word that best described the economy in 2023. The most widely forecasted recession in history never materialized, despite the Federal Reserve’s efforts to stamp down decades-high inflation by slowing the economy. Indeed, most employers looked through the volatility, with payrolls expanding by more than 3 million jobs.

As the calendar turned to 2024, there was a renewed sense of optimism that consumers will continue to drive growth in the economy. However, the business cycle is not dead, and eventually there will be sand in the gears of this extended economic expansion.

While an economic slowdown in 2024 is probable, it doesn’t mean that a recession is inevitable. Given its underlying strength as 2023 ended, the expectation is for the national economy to weather the storm and continue to grow in 2024.

This article presents the latest trends in key economic indicators as well as an outlook for the year ahead. Visit this page throughout the year for the Association’s latest projections for the U.S. economy. 

Job growth showing no signs of stalling

Job growth in the national economy maintained its momentum as the calendar turned to 2024. Employers added nearly 700k jobs in December and January, the largest 2-month increase in nearly a year. January represented the 37th consecutive month of job growth, a period during which the national economy added more than 15.1 million jobs.

Local labor conditions vary

The national economy is 5.4 million jobs – or 3.5% – above pre-pandemic employment levels. However, this varies significantly across the country. Employment levels in states like Idaho (+12%), Utah (+10%), Nevada (+10%), Florida (+9%) and Texas (+9%) are well above February 2020 readings. At the other end of the spectrum, 11 states have yet to fully recover from pandemic job losses.

Unemployment rate remains below 4%

The jobless rate continues to suggest that the economy is at or near full employment. The national unemployment rate stood at just 3.7% in January, which marked the 24th consecutive month below 4%. That’s the longest period of sub-4% unemployment since the late 1960s, when the jobless rate spent 27 months below 4%.

11 states have jobless rates below 3%

Labor market trends vary significant by state. Eleven states have unemployment rates below 3% – led by Maryland (1.9%), North Dakota (1.9%), South Dakota (2.0%) and Vermont (2.2%). Meanwhile, Nevada (5.4%), California (5.1%) and the District of Columbia (5.1%) have jobless rates above 5%.

Economy projected to add 1.5 million jobs in 2024

Employment is expected to continue rising in 2024, though not at the robust pace that was posted during the last 2 months. The national economy is projected to add 1.5 million jobs during 2024, which would be less than half of the 3.1 million jobs added in 2023. On an average annual basis, the projected 1.5% job growth in 2024 would be the economy’s slowest gain since the start of the pandemic recovery.

Personal income growth expected to slow in 2024

After the income support programs enacted during the pandemic ran their course, household income was buoyed by the healthy labor market. Gains in wage rates are expected to remain elevated in historical terms, but slower job growth will likely dampen the increase in aggregate income. Disposable personal income – a key driver of restaurant sales – is projected to increase at an inflation-adjusted rate of 1.7% in 2024. While still positive, that would be down from a solid 4.2% gain in 2023.

Inflation is trending lower

After topping out at 9.1% in mid-2022 – the strongest 12-month increase in 4 decades – growth in consumer prices moderated in the months that followed. By January 2024, the 12-month inflation rate had fallen to 3.1%, though it wasn’t a straight line lower. Looking ahead, the expectation is that 12-month inflation will be in the 2.5% range by the end of 2024. That would translate to a 2.8% CPI increase on an average annual basis, the smallest annual gain since 2020 (1.2%).

Economy will continue to grow in 2024

Overall, the expectation is that the U.S. economy will continue to grow in 2024, albeit at a somewhat slower pace than 2023. Real Gross Domestic Product (GDP) – the value of goods and services produced in the United States – is projected to increase at a 2.2% rate in 2024. Although GDP will remain positive on an annual basis, there will likely be a quarter or two of modest growth in 2024.

Read more analysis and commentary from the Association's chief economist Bruce Grindy, including the latest outlook for consumers.