The Congressional Budget Office (CBO) study, released on December 15, predicted that the unemployment rate would jump from 3.9 percent to 4.4 percent by the end of the year, implying that millions of Americans will lose their jobs. The CBO painted a grim image of the US economy in 2024, attributing the predicted decline to various reasons, including poorer consumer spending, lower nonresidential investment, and lower exports. According to the research, these considerations would offset the benefits of increased government expenditure and lower taxation.
Project for an economic report?
The estimates in the CBO report were consistent with actual labor market patterns, which showed signs of tightening in December. According to the data, over 202,000 new claims for unemployment benefits were filed in the first week of the month, and approximately 1.87 million workers were still receiving benefits, indicating a lack of job chances.
The Federal Reserve had a similar prediction for the economy in 2024, but slightly more positive than the CBO. It forecasted that real GDP growth would fall to 1.4 percent in 2024 before recovering in the years following. According to the Hindustan Times, the Fed also predicted the jobless rate to rise to 4.1 percent by the end of 2024, which was lower than the CBO's prediction.
The CBO stated in its assessment that the FED may respond to the weaker economy and declining inflation by reducing interest rates sometime after March 2024. The CBO estimates that inflation will fall to 2.1 percent in 2024, which is closer to the Fed's target of 2 percent. The CBO has revised its economic prognosis downward since its previous report in February, citing slower-than-expected growth in consumption, investment, and exports.
Is the US economy on the verge of a recession?
According to Newsweek, LPL Financial's chief equity strategist Jeffrey Buchbinder warned last week that the Fed's move to decrease rates would signal that a recession was on the way or had already begun.
"The Fed will cut rates because it worries monetary policy is too restrictive for a weakening economy," Buchbinder said in a statement. "The central bank's goal remains a soft landing, and their spotty track record in achieving that goal does not mean a hard landing is necessarily in the cards." He went on to say that if a recession did come in 2024, it would be minor because the US economy had strong fundamentals and was not experiencing any large shocks or imbalances.