Economy: Georgia’s 2024 Economic Forecast

Thanks to Georgia’s recent economic development successes and strong demographics, our economy will perform better than the nation in the coming year. Nationally, I expect an economic slowdown in 2024 but not a recession. I estimate the probability of a 2024 recession at 33% for Georgia compared to just under 50% for the United States.

The resilient labor market and strong household financial positions are two reasons I expect the post-pandemic economic expansion to continue. Inflation will continue to ease, and I don’t expect additional interest rate hikes by the Federal Reserve, although inflation-adjusted interest rates (the nominal interest rate minus the inflation rate) will rise as inflation declines. This “passive” tightening and other stresses in the financial system will slow growth, but the economy will not bust.

Despite slower Gross Domestic Product (GDP) growth, I expect the U.S. labor market to remain strong enough to stave off an actual recession, but the economy will be vulnerable. The forecast calls for Georgia’s inflation-adjusted GDP to increase by 1.1%, slower than the 3% GDP growth estimated for 2023. Expect U.S. GDP to increase by only 0.8% in 2024 compared to over 2% in 2023. I expect Georgia’s job growth to slow sharply. Jobs will rise by 0.7% in 2024 compared to the estimated 2.3% gain for Georgia in 2023. On an annual average basis, the U.S. will see only 0.3% job growth in 2024.

I expect unemployment to rise slightly. Georgia’s unemployment rate will average 4.0% in 2024 compared to 3.4% in 2023. The U.S. unemployment rate will rise to 4.2% in 2024. That means there will be less traction for wage-push inflation. Inflation will slow to about 2.5% in the second half of 2024.

Despite rate hikes and risk of recession, employers have continued to hire. Why this resilience and what does it imply? In the wake of the pandemic, employers struggled to replenish their workforces. At times, there were more than two job openings for every unemployed worker. Knowing that the labor market will be tight over the next decade caused many employers to keep hiring even as interest rates soared and sales slowed. These same realities will limit layoffs in 2024. I expect employers to hold onto workers more tenaciously than during past economic slowdowns. Instead of layoffs, the emphasis will be on slowing hiring, reducing hours worked and reshuffling job duties. Such actions will help avoid a recession.

The strong financial position of households is another reason I expect a soft landing. Households took on more debt in 2022 and 2023, but debt burdens are still low. In addition, many households have locked in historically low mortgage interest rates – which means consumer spending will be less sensitive to higher interest rates than in previous economic cycles.

A big positive is that households’ cash holdings and bank account balances soared during the pandemic and remain elevated. Consumers still have about two-thirds of their excess savings, which will help spending even as job growth slows. This financial cushion means consumer spending is unlikely to dip in 2024.

A big reason I am hopeful about 2024 is lower inflation. I expect it to decline to about 2.5% by the end of 2024, compared to 8% in 2022 and roughly 4% in 2023, because most of the causes of inflation have improved. On the supply side, energy prices retreated from highs after Russia’s invasion of Ukraine, most supply-chain problems were resolved, production and productivity increased, and quantitative tightening caused the money supply to shrink.

Demand-side drivers of inflation responded to higher interest rates. Single-family housing was in recession for most of 2022-23, investment spending cooled, especially for commercial real estate, and federal stimulus to households ran its course. Thus, inflation was cut in half without causing a recession. However, inflation probably will not fall to pre-pandemic-recession levels because several drivers of inflation have not improved. Large federal budget deficits, more government regulation, relatively low foreign immigration and the retreat from globalization remain.

Georgia is well positioned to weather an economic slowdown or even a mild recession and will outperform the U.S. economy in 2024. Our main advantage is all the development projects in the pipeline. Demographic forces are another factor. Census data show Georgia’s population surged in 2022, growing about three times faster than the U.S. population. I am confident Georgia’s population will continue to grow at a pace that is at least double the national average. Population growth will support labor force growth and economic growth higher than that of the nation.

Jeffrey Humphreys is the Director of The Selig Center for Economic Growth at the University of Georgia’s Terry College of Business.