Slower overall economic growth likely in 2024 

by Kim Souza ([email protected]) 1,295 views 

After a better-than-expected economy in 2023, a 2024 economy should see reduced consumer spending, lower wage growth and a slightly higher unemployment rate, according to economists speaking Friday (Jan. 26) at the 30th Annual Business Forecast Luncheon in Rogers.

Around 1,200 people gathered at the annual event held at the Rogers Convention Center. Mervin Jebaraj, executive director for the Center for Business & Economic Research at the University of Arkansas, said the economic slowdown is already underway across the Natural State.

Jebaraj expects the state to add between 10,000 and 10,500 jobs in 2024, and roughly half of those will be in Northwest Arkansas, with central Arkansas seeing growth in leisure and hospitality and healthcare jobs. He said Fort Smith can look for more construction jobs with Umarex USA’s $30 million investment in its Chaffee Crossing facility which will also add 76 jobs manufacturing jobs that pay more than $20 per hour.

He said the rate of job growth is below the levels of the past two years but still strong in the largest regions of the state. The agriculture sector was a drag on the state’s economy in 2023. Jebaraj said the agriculture industry typically contributes $3 billion to the state’s economy. In 2023, the contribution was $1.3 billion. He expects some of that pressure to continue in 2024 with falling commodity prices.

Jebaraj said the Jonesboro metro also saw stagnant jobs gain in 2023, in part because of the region’s tie to the agriculture industry. The same was true for the Pine Bluff metro. He said the rate of population growth in Northwest Arkansas has also slowed to around 9,000 per year, down from around 12,000 in past years.

Jebaraj remains bullish on the local economy and other metros around the state, saying that growth is likely to be slower in 2024 but still positive overall with a soft landing.

Ellen Zetner, chief U.S. economist at Morgan Stanley, also had an overall upbeat forecast for the U.S. economy. Zetner expects the Fed to begin cutting interest rates by 1% in 2024, the first cut to come at the June meeting. She expects U.S. GDP will slow to 1.6% in the first and second quarters, improving to 1.9% by the end of 2024.

“I believe the Fed will achieve the soft landing as much of the country has already seen their economies cool in the past few months. The Federal Reserve Bank in Philadelphia reports on state economies each quarter. In January of 2023, all of the states were in expansion. By the November report only half of the states were seeing economic expansion,” Zetner said.

Arkansas was not among the states with expanding economic growth as of the November report with a negative GDP reading of 0.1% to 0.5% because of the drag from the weaker agriculture sector. Zetner said China’s reduction of bourbon purchases from Kentucky hit that economy hard in 2023. She expects the national unemployment rate will increase slightly in 2024 to 4.1% and job growth rates will slow.

She also expects slower consumption amid easing income gains. She said credit quality is deteriorating for younger consumers as student loan repayment resumed and debt levels increased. Another area she links to lower consumer spending is a drawdown of cash assets among all income classes in the past two years.

The biggest risk to the U.S. economy for the long term is rising public debt levels at higher interest rates amid lower nominal growth rates, Zetner said.

Gregory Daco, chief economist with EY, provided a global forecast that also depicted a slowdown in most of the economies around the world in 2024. He said 2024 will be the year of transition as countries try and achieve equilibrium coming from the highs and lows brought on by the pandemic, now four years ago.

He said Canada’s economy is expected to slow through mid-year, constrained by elevated debt servicing costs and sustained higher consumer prices. The European Union is poised to see a rebound in 2024 following a tough 2023. He said Germany could lag other countries in their recovery.

Japan’s economy is also improving but will see contained growth in 2024 amid cautious consumer spending despite easing inflation. China’s economy is slowing amid a combination of cyclical and structural challenges that could mean mainland China won’t be the major global growth engine that it has been in the past. In addition to an aging population, constrained consumer spending, shifting preferences, and increasing cost of doing business have dampened growth prospects in China.

Daco said interest rates around the world will come down some this year. He cautioned businesses who want to wait on expansion and growth investments for lower borrowing costs that if the right opportunity presents itself then companies should go for it.

“You can always refinance in a year or so when rates go lower. We may not see rates as low as we got accustomed to in the past decade but lower rates are coming in 2024 and 2025,” he said.