JPM - Feroli - 2024 US Economic Outlook Walk the line_20231116.pdf

JPMORGANFMorGmrPaPNorGnFyFMrR,lGJPiFNfFMGetehJPMORGANpppdcuNPMgaNM.FOydrPNmrPaPNorGaTGUPSorwGnFyFMrRvorRFSGsFMPSo(1-212)834-5523michael.e.feroli@jpmorgan.comJPMorganChaseBankNAbaoFSG-oSiFM(1-212)622-6039daniel.a.silver@jpmorgan.comJPMorganChaseBankNAvWMOGByro(1-212)622-0288murat.tasci@jpmchase.comJ.P.MorganSecuritiesLLC(Theeconomyeasilyavoidedrecessionin2023,butlabormarketactivityhasbeenslowing(Welookformomentumtoslowfurtherinto2024asgrowthslipsbelowtrend...(...andtheeconomywalksafinelinebetweenexpansionandcontraction(Dragsfrommonetarypolicywillpersist,andinsomecasesbuild,into2024(Weexpectfiscalsupportfromrecentyearswillturntoamodestfiscaldragin2024(WeseerealGDPup0.7%in2024,downfromnear-3%in2023(%q4/q4)(Jobgrowthisexpectedtoslow,andtheunemploymentratetocontinueitsrecentupwardtrend(Wageinflationshouldmoderatefurthernextyearinasofterlabormarket(Inflationtrendsarealreadycooling:asofterlabormarketshouldbringmoremoderation(CorePCEinflationtobeup2.4%in2024,downfrom3.4%in2023(%q4/q4)(Withslowingjobgrowth,andfurtherdisinflation,wethinktheFOMCwillstayonholdforawhile(FOMCtostartloweringratesin2H24toavoidarecession,withinflationcloseto,butstillabove,targetTable1:USeconomicforecasts3Q234Q231Q242Q243Q244Q24202320242025%q4/q4%q4/q4%q4/q4RealGDP(%q/q,saar)4.92.01.30.50.50.82.80.71.9Realconsumerspending(%q/q,saar)4.02.31.30.30.31.12.70.61.5CorePCEprices(%q/q,saar)2.42.62.52.42.42.33.42.42.2Unemploymentrate(%,qtravg)3.73.83.94.14.34.4Fedfundstarget(%,eop,topofrange)5.505.505.505.505.004.50Source:J.P.MorganforecastsForecastsSeepage12foranalystcertificationandimportantdisclosures.ete“GC-GmrPaPNorGVWOSPP.IGDS.GORFGSoaF){[{JprBQvBuEHB_pns2N3PMOTS3MgULbBmBvcnWTl5iOthl2Y7fBFR1zylzV9iwenDGCvlAK1j65gI}]}2MichaelFeroli(1-212)834-5523michael.e.feroli@jpmorgan.comJPMorganChaseBankNADanielSilver(1-212)622-6039daniel.a.silver@jpmorgan.comMuratTasci(1-212)622-0288murat.tasci@jpmchase.comNorthAmericaEconomicResearch2024USEconomicOutlook:Walktheline16November2023JPMORGANFormany,lifeafterthepandemicreturnedtonormallongago.TheUSeconomy,however,hasbeenlivingintheshad-owsofthateventforthepastthreeyears.Whilethepandemicwasmeasuredinmonths,thedisruptionsweredeepenoughthatunwindingtheeconomicsymptomshasbeenamatterofyears.Butunlike“longCOVID,”notallthesymptomsarepernicious.Firmsandhouseholdsthatlockedinborrowingratesin’20and’21havehadtheequivalentofacquiredimmunitytoFedratehikes.Andthefiscalmedicinefromthaterahadsurprisinglylong-lastingeffectsstretchingwellinto’23.Thesesymptomswerestrongenoughtooverpowersomeofthemostimportantlawsofeconomics.The“IScurve”linkinghigherinterestratestoslowergrowthhasbeennotoriouslyabsent,ormaybejustslowtoappear.AndinanapparentrebukeofthePhillipscurvewhichlinksinflationtolabormarkets,thecurrentinflationaryepisodetookoffwhenlabormarketswerestillloose,andthedisinflationofthelastyearhasoccurredalongsideatightlabormarket.Turninginto’24theeconomyisbecomingfurtherremovedfromthepandemicandcontinuestostepoutoftheshadowsofthatevent.Asthatoccurssomeofthelawsofeconomics