After the rollercoaster ride of the past three years, an overheated U.S. economy spent much of 2023 transitioning back toward pre-pandemic norms. As the Federal Reserve tightened monetary policy and some sidelined workers returned to the labor force, the United States avoided a recession in 2023. Heading into 2024, here are some emerging economic trends:

Interest rates may come down. In their last policy decision of 2023, Federal Reserve officials held interest rates steady for the third consecutive time. With inflation easing, the Fed has penciled in plans to cut borrowing costs three times in 2024. These rate cuts could come as soon as the second or third quarter of the year. 

Cooling inflation is still sticky. Inflation has dropped dramatically since mid-2022, falling from a 40-year high of 9.1% in June 2022 to 3.1% in November 2023. While food and energy prices have come down significantly, hitting the Fed’s target of 2% annual inflation could be slow going. That’s because services price inflation is still sticky, despite the price of goods coming down. Additionally, lower mortgage rates could spur home price increases again. 

Labor gaps continue to close. Workers sidelined during the pandemic didn’t return to work fast enough to meet the demand created by stunningly strong job growth during the recovery. The labor market, while still strong, began softening as job growth slowed and historically low unemployment ticked up slightly. Unemployment could continue to trend higher in 2024 as job growth levels out to long-term averages and more workers rejoin the labor force, improving the labor shortage.

Consumers feel less grumpy. Higher interest rates and housing inflation colored consumer’s opinions about the economy in 2023. But recent consumers surveys suggest Utahns and Americans in general are feeling more optimistic as 2024 approaches. Utah’s consumer sentiment rose 6.4% in November, as measured by Kem C. Gardner Policy Institute’s Survey of Utah Consumer Sentiment. A similar survey by the University of Michigan found that sentiment fell 4% among Americans during the same time. However, preliminary data showed U.S. consumer sentiment soaring 13% in December – 39% above the all-time low measured in June 2022. Consumer sentiment matters because attitudes about the economy drive behaviors like spending and investing, often acting as a self-fulfilling prophecy.

International conflicts create uncertainty. Spillover effects from the Israel-Hamas war, Russia-Ukraine war, and tensions between China and Taiwan could impact the U.S. economy in 2024, adding to domestic uncertainty surrounding the presidential election year. 

Heading into 2024, Utah’s economy remains strong and resilient. The state continues to benefit from strong population growth and net in-migration, low unemployment, and solid job growth.

Robert Spendlove is senior economist for Zions Bank, a division of Zions Bancorporation, N.A