Recession Now Unlikely, Though, For Many, It Will Feel Like One

New York, NY, January 15, 2024-"The good news is the probability of a recession is down sharply, according to The Wall Street Journal’s latest survey of economists. The bad news is that, for a lot of people, it is still going to feel like a recession.

“Business and academic economists surveyed by the Journal lowered the probability of a recession within the next year, to 39% from 48% in the October survey.

“‘A recession in the year ahead seems less likely than it appeared at the start of 2023, since interest rates are trending lower, gas prices are down from last year, and incomes are growing faster than inflation,’ said Bill Adams, chief economist at Comerica Bank.

“Still, economists on average expect the economy to grow just 1% in 2024, about half its normal long-run rate, and a significant slowing from an estimated 2.6% in 2023.

“‘This is less a recession and more of a growth stop,’ said Rajeev Dhawan, an economist at Georgia State University.

“American employers should keep adding jobs in 2024, but at a much slower pace than in recent years. Economists expect payroll gains to average 64,000 a month this year, less than a third of the 225,000 average in 2023 and far below 399,000 in 2022.   

“With job growth falling below the growth of the labor force, economists expect the unemployment rate will climb from 3.7% in December 2023 to 4.1% in June and 4.3% by the end of the year. While that is low historically, a 0.6 percentage point increase in the jobless rate would imply a net one million more Americans unemployed by the end of the year, relative to this past December. Moreover, in the past that much of an increase in unemployment has almost always occurred during recessions, according to one widely followed rule.

“One reason a growing economy may still feel to many like a recession is the wide dispersion in performance across industries. Cyclical sectors-those most sensitive to the economy’s ups and downs-are likely to struggle in 2024, even if there isn’t an overall economic contraction, economists say.

“‘Cyclical sectors of the economy are pulling in the reins on employment, and we look for companies to further tighten the reins as they lose pricing power,’ said Kathy Bostjancic, chief economist for Nationwide Mutual.

“A quarter of economists expected manufacturing to see the weakest job growth this year, while 17% cited retail, and 12% said transportation and warehousing. Those are all cyclical sectors. The majority of economists said healthcare will be the sector with the strongest job growth in 2024, while 11% cited leisure and hospitality.”