Despite the many “doom and gloom” predictions we faced at the start of 2024, the year ended on a bit of a high note. The economy was performing well, showing signs that it was on solid footing to start the new year. The data continued to show gradual, but growing strength, the GDP grew at a 3.1% in the third quarter of 2024. The year closed out with a healthy labor market, lower unemployment, and inflation slowly starting to drop.
Reflecting back on last year, we can clearly see how our economy defied expectations, in spite of global challenges, inflation, geopolitical uncertainty, and other challenges. Our economy managed, with great resilience, to avoid the much-feared recession. There were many factors that played a role in bringing stability and recovery in many sectors.
After the pandemic, central banks around the world, particularly the U.S. Federal Reserve, initially ramped up interest rates to curb inflation, but by 2024 these institutions began to fine tune their policies. We saw the Fed lower interest rates three times last year. It was a difficult task trying to manage inflation without stifling growth but is largely credited for staving off the dreaded recession.
Consumer spending was also a key driver of the recovering economy. Because unemployment rates were below market expectation, it signaled a demand for workers, creating a stable income for many households. Several sectors, including technology and healthcare, saw higher wages. Having a reliable stream of income bolstered consumer spending, having a domino effect which fueled growth in industries like tech, real estate, and consumer goods. Consumer spending is the primary component of the increased GDP.
This isn’t to say that there weren’t any issues in our economy, it wasn’t all sunshine and roses. There were many people struggling against high inflation. For a good portion of Americans, grocery bills nearly doubled, which can account for a portion of the uptick in consumer spending. And while many people were able to find jobs, they weren’t necessarily high paying or reliable jobs.
So, while the numbers looked good on paper, there were still many Americans wondering if we really had avoided a recession. For a recession to be declared there needs to be two successive quarters in which there is economic decline in which trade and industry are reduced. This is usually reflected in a drop in GDP. But you know how the old saying goes, “When your neighbor is out of work it’s a recession; when you’re out of work it’s a depression.”
Regardless of the difficulties that still exist, the continued growth we have seen in recent months gives hope for this coming year. According to current projections, the US economy is expected to see moderate growth with a projected GDP growth rate around 2.1%, cooling inflation, and lower unemployment. Here’s to a prosperous year!
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