A year ago when we stepped into 2023, everyone agreed that a US economy recession was on the way. However, as the year wraps up, the predicted economic downturn didn’t happen.
Looking ahead to the 2024 economic outlook, there’s still a possibility of a US economic recession, according to experts.
With inflation running high, the Federal Reserve has increased interest rates—a move that traditionally sparks a recession, marked by two consecutive quarters of negative gross domestic product growth.
2024 Economic Outlook by Analysts
In a December survey by the National Association for Business Economics, over three-fourths of economists, or 76%, indicated that they think the likelihood of a US economic recession in the next 12 months is 50% or less.
Some 2024 economic outlooks are optimistic, with Bank of America predicting a soft landing instead of a recession, even in the face of potential downside risks.
“We anticipate a mild recession as our base case,” stated Larry Adam, Chief Investment Officer at Raymond James. The projected downturn, expected to be “the mildest in history,” is predicted to commence in the second quarter, according to the firm’s outlook.
Among NABE economists foreseeing a downturn, 40% believe it will commence in the first quarter, while 34% suggest the second quarter. For many Americans grappling with elevated prices due to rising inflation, the perception of a downturn might already be present.
Looking at the present situation, a recent MassMutual survey reveals that 56% of people believe the economy is already in a recession.
As we move into the new year, the layoffs that gained attention at the end of 2023 might persist. In 2023, 29% of companies laid off workers, and now, 21% of companies anticipate potential layoffs in 2024, according to Challenger, Gray & Christmas, a firm specializing in outplacement and business coaching.
To tackle these unpredictable 2024 economic outlook, experts advise taking the following steps:
1. Trim Your Debt Load
According to LendingTree, 34% of consumers accrued debt this holiday season, a slight decrease from 35% in 2022.
The average owed amount is now $1,028, notably lower than last year’s $1,549 and the lowest since 2017. However, the impact of higher interest rates makes these debts costlier, with one-third of holiday borrowers facing rates of 20% or more.
Despite these trends, credit card balances reached a record $1 trillion this year. Explore strategies to manage and reduce your debt payments.
Start by automating your monthly payments to sidestep late penalties, fees, and rate hikes, as suggested by LendingTree. If you’re grappling with lingering credit card balances, explore ways to cut costs—consider a 0% balance transfer or a personal loan.
Another option is reaching out to your current credit card provider to negotiate a lower interest rate. Crucially, choose a debt repayment strategy and commit to it for effective financial management.
2. Prepare for Financial Resilience
Barry Glassman, a certified financial planner, emphasizes the importance of stress-testing your finances in the face of a potential recession. Whether you’re employed or not, the impact of an economic downturn could alter your income.
Assess how you would cope with a reduction in earnings—evaluate your ability to cover bills in case of job loss, considering your savings and available resources.
Glassman advises stress-testing your income against ongoing obligations and ensuring the presence of a safety net for financial stability.
3. Build Up Your Emergency Fund
Even a small increase in your emergency savings can safeguard your budget from unexpected expenses like car repairs or surprise bills. Despite this, surveys reveal that many Americans struggle to cover a $400 expense in cash.
Experts recommend automating your savings to ensure you consistently set aside money without feeling its impact on your paycheck.
Mark Hamrick, senior economic analyst at Bankrate, emphasizes the importance of saving, stating, “I have yet to meet anybody who saved too much money.”
Additionally, take advantage of higher interest rates, as potential returns on savings are currently the highest in 15 years, although this may change with the Federal Reserve expected to cut rates in 2024.