Survey: Economists project a milder hiring slowdown than originally expected for 2024

Month after month of a surprisingly resilient U.S. labor market isn’t keeping the nation’s top economists from continuing to project a hiring slowdown — even if they don’t expect that deceleration to be as severe.

Not a single economist in Bankrate’s Fourth-Quarter Economic Indicator poll sees the nation’s unemployment rate holding — or falling lower — than its current 3.7 percent level. They expect a 4.3 percent unemployment rate by the end of December 2024, with job growth over the next year dipping to just 81,000 a month, according to their average forecast.

Still, economists have now upgraded their job market forecasts for the third consecutive survey. Their estimates for job creation are the best in over a year, even though they’re expecting hiring to be three times slower over the next 12 months than it was in the past year. Their unemployment rate estimates are the lowest since the second quarter of 2022.

Key insights on the economy from Bankrate’s fourth-quarter Economic Indicator poll

The job market has been defying the odds of a slowdown — at least for now

The job market isn’t roaring like it once was. Job openings have dipped to just 8.7 million from their record high of 12 million in March 2022, Labor Department data shows. Employers created half as many jobs in 2023 as they did in the year prior. Wage growth has dipped from nearly 6 percent to 4 percent since the Fed began raising interest rates, a sign that the balance of power between employees and businesses may be shifting.

Yet, it’s firing on all cylinders, at least by historic standards. The latest data shows that employers added about 800,000 more jobs in 2023 than they did in 2019, a year when the labor market was already seen as the best in half a century.

“Economists generally underestimated the job market, which fueled incomes and in turn fueled spending,” says Robert Frick, corporate economist at Navy Federal Credit Union. “The mistakes included focusing how tight the job market was and underestimating how many people were willing to come off the sidelines and enter the workforce.”

Reflecting the job market’s strength, no economist sees job cuts outnumbering job creation. In the prior-quarter survey, more than a third of economists (or 35 percent) expected the average monthly pace of job creation over the 12 months to sink into negative territory.

Meanwhile, more than half of economists in Bankrate’s latest poll (53 percent) see job growth averaging 100,000 or more over the next 12 months, up from less than a third (29 percent) in the third-quarter survey. More than a quarter (roughly 27 percent) even see average monthly job creation rising by 130,000 over the next year.

The most upbeat forecast for hiring in the year ahead called for an average monthly job growth pace of 170,000 by December 2024. On the other end of the range, the most downbeat estimate called for just 8,000 jobs a month on average.

On the unemployment side, just 13 percent of economists see the nation’s joblessness rate holding below 4 percent. A large majority (87 percent) see it rising to 4 percent or more. More than a quarter (roughly 27 percent) see unemployment rising to 4.5 percent or higher. Forecasts ranged from a low of 3.8 percent to a high of 5 percent.

Even if the most downbeat forecasts come to fruition, a 5 percent unemployment rate is nowhere near as severe as the 10 percent joblessness rate in the aftermath of the Great Recession — or the 14.7 percent level during the coronavirus pandemic.

And offering jobseekers a reason to be optimistic: Hiring over the past two years hasn’t cratered as much as economists have expected. Since the fourth quarter of 2021, the nation’s top economists have predicted a much sharper slowdown than what came to fruition.

Experts cite a growing labor force as one reason the job market has surprised to the upside. The share of workers in their prime working age — those between ages 25 and 54 — soared to the highest level in nearly two decades, according to the Labor Department. Meanwhile, the entire civilian labor force grew in 2023 by the most in a single year on record.

But economists note that not everyone has felt the resilience. The bulk of job creation has been concentrated in key sectors, mainly health care, government, as well as leisure and hospitality. Hiring in those categories could slow if consumer spending dips in the year ahead.

“We expect economic growth to moderate through 2024 in response to high interest rates and unwinding fiscal stimulus,” says Mike Englund, chief economist at Action Economics. “The slower pace of economic growth should allow a more balanced labor market with a modestly higher jobless rate.”

Here’s what the nation’s top economists are saying about the job market

“The outlook for the labor market is cautiously optimistic, anticipating tempered growth. The hope is that any further cooling in the labor market will manifest as a reduction in job openings rather than an increase in layoffs.”

— Odeta KushiDeputy Chief Economist at First American Financial Corporation

“Wages increased at a 4 percent rate over the past year, a pace likely too rapid to be consistent with the Fed’s 2 percent inflation target. These trends — in combination with the drop in the unemployment rate to 3.7 percent from 3.9 percent in October — paint a picture of a job market that is still strong, even though the number of job openings has declined, and at least some sectors are seeing an increase in layoffs.”

— Mike FratantoniChief Economist at Mortgage Bankers Association

“I expect a sluggish start to job growth in the first half of the New Year, but hiring should pick up again in the second half as the Fed cuts interest rates and financial conditions ease.”

— Scott AndersonChief U.S. Economist at BMO Capital Markets

• Methodology

  The Fourth-Quarter 2023 Bankrate Economic Indicator Survey of economists was conducted Dec. 11-18. Survey requests were emailed to economists nationwide, and responses were submitted voluntarily online. Responding were: Mike Fratantoni, chief economist, Mortgage Bankers Association; Odeta Kushi, deputy chief economist, First American Financial Corporation; Nayantara Hensel, Ph.D., chief economist, Seaborne Defense; Yelena Maleyev, senior economist, KPMG US; John E. Silvia, founder, Dynamic Economic Strategy; Gregory Daco, chief economist, EY; Scott Anderson, chief U.S. economist, BMO; Dante DeAntonio, senior director, Moody’s Analytics; Lawrence Yun, chief economist, National Association of Realtors; Bernard Markstein, president and chief economist, Markstein Advisors; Robert Frick, corporate economist, Navy Federal Credit Union; Bill Dunkelberg, chief economist, NFIB; Joseph Mayans, director of U.S. economics, Experian; Sean Snaith, director, Institute for Economic Forecasting, College of Business at the University of Central Florida; and Mike Englund, chief economist, Action Economics.