By Wes Muller, Louisiana Illuminator
The U.S. economy is on remarkably strong footing as 2023 winds to an end with one of the best job markets in history and soaring stock prices. Inflation is at a healthy low, and economic growth has exceeded pre-pandemic levels.
Fears of a recession that dominated headlines a year ago never came to fruition, and the talk of looming bank panics in March also fizzled out. This month, Federal Reserve Chairman Jerome Powell delivered his most optimistic report yet, announcing a pause on interest rate hikes after the Consumer Price Index, used to measure inflation, slowed to 3.1% following a peak of 9.1% in June 2022.
Powell’s plan of slow and steady interest rate increases, the Fed’s only tool to wrangle inflation, appears to be on par for what he calls a “soft landing” to reach a target of 2% inflation without spurring the economy into recession.
University of Louisiana–Lafayette economist Gary Wagner said the country is on path for a soft landing by late 2024 or early 2025, barring any unforeseen events. Like Powell, Wagner stopped short of saying the recovery is over.
“Inflation has been slowing,” Wagner said. “We’re on the right track, though we’re certainly not out of the woods yet.”
Wagner noted there are still some analysts forecasting a recession in 2024, but he disagrees.
U.S. job growth has reached roughly 157 million people employed, exceeding a pre-pandemic high of 152 million. Wage growth also remains almost two percentage points higher than pre-pandemic levels, according to data from the Atlanta Fed.
A big marker has been gross domestic product (GDP), which analysts use to measure economic growth. Barely eclipsing 2.5% in the years before the coronavirus pandemic, GDP reached 5.95% in 2021, the highest since 1984. It cooled last year, but reached record highs again during this year’s third quarter with a growth rate of 5.2%.
Wall Street has also seen significant gains with financial markets achieving one of their biggest monthly climbs in history in November.
Americans are still feeling pressure from the high cost of groceries, which is up 1.7% from a year ago. But gasoline prices have fallen 9% over that same period. Rent and housing are also still high, but those have been trending upward since 2010 and have also begun to cool.
A pricing report from the online real estate listing platform Zillow indicated some stabilization in the rental market during November. The price of asking rents decreased 0.2% from October to November. Overall rent increases have slowed down since their February 2022 peak and remain lower than pre-pandemic rates, according to the report.
After construction costs soared to 30-year highs from the supply chain crunch of the coronavirus pandemic, most of that pressure has subsided, Wagner said.
Home values rose month over month in just two of the 50 largest U.S. metro areas: Miami (0.3%) and Las Vegas (0.1%). The largest annual drop in home values this year, 8.9%, occurred in New Orleans, according to Zillow.
Like much of the country, Louisiana also experienced a strong labor market during 2023 but has room for improvement, Wagner said. The state recorded one of its lowest unemployment rates in history with 3.3% during October, but some of that is the result of workers dropping out of the labor market and not returning, he said.
Louisiana is still among the bottom five states in the country for jobs and economic growth, and the many tax incentives the state hands out to businesses are “clearly not working,” Wagner said.
“People are the best economic resource we have, but we’re losing a lot of college educated people to other states,” Wagner said.
U.S. Census figures show Louisiana saw a 1.8% population loss from 2020 to 2023, one of the largest drops in the nation.
As for professions leaving Louisiana, the biggest losses are teachers, engineers and nurses, Wagner said. They’re mostly leaving for better pay, more affordable housing or to be closer to family, he said. The states receiving them include Texas, Florida, Colorado and Tennessee.
However, he said, the state should post some gains in 2024.
“We might see Louisiana’s economy slow a little bit, but I’m still expecting most regions of the state to experience modest job growth,” Wagner said.
