Center for Economic Analysis

2024 Economic Projections

There are a lot of factors affecting this economy to talk about, but we have limited space here to cover it all. As of this writing, there are many issues at play. The federal government used a 45-day temporary stopgap measure to stave off a federal government shutdown, and the UAW strike has entered into its third week. Inflation remains a hot topic for the Federal Reserve, and they are implementing monetary policy accordingly and making dollars harder to come by. Accordingly, interest rates are up, and consumers are getting ever more squeezed between higher prices and paying higher interest on credit card debt.

There are also long-term trends impacting the direction of the economy. The economy is still adjusting to pandemic shifts in consumer purchasing habits, just as consumers are adjusting to pandemic-free living. During the pandemic consumers shifted purchases to big ticket items like homes and home remodels and shifted away from services. We see that momentum being carried forward with relatively strong growth in goods producing sectors and lighter growth in the service-providing sectors. Supply chains are also adjusting. Where supply chain disruptions made producers question the wisdom of limited inventories and just-in-time manufacturing, more stable supply chains will likely bring about some inventory corrections.

There are some key things to look for in the forecast. First, we project that the Federal Reserve Banks aggressive stance on inflation will have a slowing effect on Michigan’s economy. While nationally, the forecast projects a slight loosening of the labor market, employers in Michigan should expect labor shortages well into 2024. Slowing employment growth, however, suggests that the tight labor market may see a reprieve, but we’ll have to wait a bit longer. As we project continued growth in employment, the post-pandemic labor shortages are expected to ease somewhat but not go away. The tight labor market is likely to boost overall wages, but for workers, those wage hikes are mostly keeping pace with inflation.

The Federal Reserve is poised to retain its hawkish position on inflation through 2023 and into 2024. That is, expect more Federal Reserve rate hikes, prolonging the threat of a central bank-induced recession in 2024. The aggressive Federal Reserve stance means we should anticipate that interest and mortgage rates will remain high relative to pre-pandemic levels. While higher mortgage rates typically have a deflationary effect on housing prices, housing demand has remained robust. As such, some experts are starting to voice concern about a housing market bubble. If such a bubble exists, it will not approach the level seen in the 2008 market collapse.

In making our 2024 forecasts, we also project how 2023 rounds out. Our national forecast for employment includes a 2023 projection of 2.4 percent annual growth, down from 4.3 percent in 2022. The 2024 forecast pegs employment growth at 1.6 percent. Both represent a slowing of the national economy. Employment in Goods producing sectors will lead growth – mostly in natural resources and construction. Service providing sectors will remain relatively strong through 2023 but growth will ease in 2024. Following post-pandemic trends, the leisure and hospitality industry is poised for continued growth.

Gross domestic product, the broadest measure of national earnings generated in this economy, is set to continue to grow but at a declining rate. Here 2021 growth was pegged at 12.7 percent per year. This tapered to 9.1 percent growth in 2022, and we’re projecting 6.2 percent growth in 2023 and 4.4 in 2024. Businesses are shedding inventory that accumulated during the post pandemic supply chain disruptions. Inventories are tracked with investments, and we anticipate investment will return to growth in 2024, barring unexpected changes in the economy. Finally, the pandemic gave rise to multiple stimulus and public safety net programs resulting in large transfers from state and federal governments to consumers. As these programs are sunsetted, we anticipate a significant drop in transfers as a component of personal incomes in 2023. This, and the return to paying student loans, may have a dampening effect on consumer purchases moving into 2024.

Updated October 4, 2023