What should you expect from the economy in 2024?

The economy in 2023 reminds me of Rocky Balboa, the boxer with a strong chin from the Rocky films who, despite getting hit over and over, keeps moving forward.

A year ago, the consensus prediction among investors and professional forecasters was slower growth and higher unemployment. Inflation was still above 6%, the Federal Reserve increased interest rates to one of the highest rates in 40 years, and the stock market ended 2022 in the red. Many observers says a “soft landing” was a pipe dream and a recession inevitable.

The year 2023 brought its own set of challenges. To name a few, a debt ceiling standoff started in January and continued until May, bringing the government dizzyingly close to default and causing a ratings downgrade. In March, the failure of Silicon Valley Bank started a crisis that, had it not been contained by a historic expansion of deposit guarantees, would have spread through the system and taken down the economy. A war broke out in Gaza. A large-scale auto workers strike temporarily shut down large parts of the sector. And the economy of China, a major trading partner, decelerated.

Given all this, it is remarkable how good the numbers look right now. Inflation has steadily fallen to around 3% and is now within striking distance of the 2% target. The most recent gross domestic product, or GDP, report shows a robust 3% year-on-year growth rate, the unemployment rate remains at 3.7%, and the stock market has made a roaring comeback. The numbers look stronger than those of other major advanced economies, such as the eurozone, the United Kingdom, Japan, or Canada.

However, it is too early for a victory parade. The fight against inflation is not over, monetary policy has long and variable lags, and, even in a strong economy, many people are struggling. But, thus far, it is hard to imagine a softer landing than 2023.