At the end of each year, I post Ten Economic Questions for the following year (2024). I followed up with a brief post on each question. Here is review (we don’t have all data yet, but enough). I’ve linked to my posts from the beginning of the year, with a brief excerpt and a few comments.
I don’t have a crystal ball, but I think it helps to outline what I think will happen – and understand – and change my mind, when the outlook is wrong. As an example, when the pandemic hit, I switched from being mostly positive on the economy to calling a recession in early March 2020.
Here were my questions for 2024 (posted in December 2023). The analysis for the housing related questions were posted in the newsletter, and the other questions on this blog.
That was correct.
Here is a graph from Altos Research showing active single-family inventory through December 16, 2023.
The red line is for 2024. The black line is for 2019. Note that inventory is up from the record low for the same week in 2021, and up 26% compared to the same week last year.
However, inventory is still below pre-pandemic normal levels.
“I don’t expect inventory to reach 2019 levels but based on the recent increase in inventory maybe more than half the gap between 2019 and 2023 levels will close in 2024. If existing home sales remain sluggish, we could see months-of-supply back to 2017 – 2019 levels.
That would likely put price increases in the 3% to 4% range in 2024. I don’t expect either a crash in prices or a surge in prices. “
That was correct.
As of September, the National Case-Shiller index SA was up 3.9% year-over-year. (Case-Shiller for October will be released December 31st).
This graph shows single and multi-family housing starts since 2000.
As of November, single family starts were up 7.2% year-to-date (YTD) compared to the same period in 2023. Single family starts were a little stronger than expected.
Multi-family starts were down 28.9% YTD (pretty close!).
“Clearly wage growth is slowing and I expect to see some further decreases in both the Average hourly earnings from the CES, and in the Atlanta Fed Wage Tracker. My sense is nominal wages will increase close to 3.5% YoY in 2024 according to the CES. “
The graph shows the nominal year-over-year change in “Average Hourly Earnings” for all private employees from the Current Employment Statistics (CES).
There was a huge increase at the beginning of the pandemic as lower paid employees were let go, and then the pandemic related spike reversed a year later.
Excluding the pandemic spike, wage growth peaked at 5.9% YoY in March 2022 and declined to 3.6% in July 2024. However, wages have ticked up to 4.0% YoY in November.
“My guess is there will be around 5 rate cuts in 2024 … I also expect the FOMC to start discussing slowing balance sheet runoff late in the year.”
There were 4 rate cuts in 2024 with the Fed Funds rate target range at 4-1/4 to 4-1/2 percent in December 2024. There has also been some discussion of slowing balance sheet runoff.
“My guess is core PCE inflation (year-over-year) will decrease in 2024 (from the current 3.2%), and I think core PCE inflation will be close to the Fed’s target by Q4 2024.”
According to the November Personal Income and Outlays report released this morning, the November PCE price index increased 2.4 percent year-over-year, and the November PCE price index, excluding food and energy, increased 2.8 percent year-over-year. Inflation declined, but not as much as expected.
“There are probably a few more people that will return to the workforce in 2024, pushing up the participation rate. However, demographics will be pushing the rate down. So, my guess is the participation rate will decline slightly in 2024 to around 62.3%”