Dubois County Rotary Club hosts Economic Futurecast Luncheon: Mixed economic bag predicted for 2024

People flocked into the Thyen-Clark Cultural Center Atrium last Thursday, November 16, for the Rotary Club of Dubois County’s 19th annual Economic Futurecast Luncheon.

One of Rotary’s most popular events, the organization hosted a panel of experts from Indiana University’s Kelley School of Business who predicted trends in the national, Indiana and global economies for 2024, as well as finance and stocks.

Dr. Timothy Slaper, Research Director of the Indiana Business Research Center, spoke first regarding the US economy and began by informing attendees that last year’s forecast “didn’t follow script.” Growth exceeded expectations in virtually every metric.

Next year, Slaper predicts that, in the face of “a historic increase in interest rates,” growth will weaken but remain in positive territory.

Output growth was predicted to increase by 1.1% in 2023. It increased by almost three percent. Job creation was also nearly double what was predicted.

Despite rising inflation, Americans continued to spend. Slaper predicts demand will diminish somewhat and, if consumers pull back on spending, the economy will fall short of expectations. He foresees a slowdown in employment growth and possibly modest job losses as well.

The wild card is the international situation which “presents risk to the US — economic and otherwise — greater than at any time in at least 60 years.”

Considering all factors, Slaper predicts an economic slowdown in the first two quarters of 2024 but an acceleration in the second half of the year.

Back home in Indiana, Slaper expects a slowdown in employment growth in 2024, with income growth decreasing in the first third, then stabilizing at just under 4%. “It depends in what sector you’re working,” Slaper explained.

Indiana’s employment and income trends track with the US, growing more quickly than the national average, but at lower rates of growth. Among his concerns is the imbalance between needed skills and education. Purdue University is noted for STEM degrees, but “the graduates don’t stay here,” he lamented.

Baby Boomers are retiring, taking a wealth of experience with them, and there is a “silent storm” of small business owners retiring without a successor. Some are taken up by private equity firms, which “weakens the fabric,” he said. “Entrepreneurs are the future.”

Apprenticeships are gaining ground, but training in crafts and trades seems to be denigrated as opposed to technology. “My concern is, ‘Who’s gonna make stuff?’” Slaper mused. “And how do we go about integrating [crafts and trades] into the educational system?”

On the international level, Slaper expects global output to grow at 2.9% in 2024. Inflationary pressures experienced globally are expected to ease somewhat but still put pressure on growth due to restrictive policies and deteriorating purchasing power for households.

Advanced economies are predicted to grow at 1.4% in 2024, with emerging markets and developing economies to grow at 4.0%.

Downside risks are the war in the Middle East, as well as tighter monetary policy to curb inflation.

Dr. Chad Ham, Associate Professor of Accounting at Kelley School of Business, reported on the state of the stock market and future predictions.

The positive news is, “Our model currently indicates there is little possibility of a recession in the near future.”

He predicts the next Fed move to be a rate cut in July 2024; however, inflationary data may lead to no change or even a hike.

The yield curve is flattening, he said, with longer-term rates rising but still inverted.

A continued de-inverting of the yield curve may be taken as a positive signal by equity investors.

US consumer activity is slowing, Ham said. The resumption of student loan payments, along with the high cost of housing, autos and consumer credit, may exacerbate the slowdown.

Uncertainty in the equity markets may make the bond market more attractive as interest rates rise. The market is strong, but risky.

Ham, while cautiously optimistic, advised attendees to take any stock predictions with a grain of salt since the market is affected by many variables.

A question and answer session followed.

Main take-aways were that the economy has recovered from the COVID years in terms of growth rate, but it’s “still a bumpy ride”; that revised numbers are released every five years, and that projections are calibrated on the best data collected presently; a housing bubble is not likely, and plummeting housing prices are not foreseen.