No recession, but jobs market to tighten, consumer spending to moderate, economist predicts

Jun. 25—SOUTHERN INDIANA — Expect a slowdown in the jobs market, a more cautious consumer and interest rate cuts by the Federal Reserve this year.

That was the updated 2024 forecast provided Tuesday by Uric Dufrene, Sanders Chair in Business at Indiana University Southeast, during the school's annual Mid-Year Economic Update.

While Dufrene cautioned that higher costs may soften consumer spending, and that the jobs market locally and nationwide will continue to tighten, he doesn't expect a recession, which many economists predicted for 2024.

"I'd like to call this sort of a normalization," Dufrene said of drops in national payrolls, which he added are still abnormally high.

He doesn't anticipate a significant acceleration or drop in the Louisville Metro/Southern Indiana job market, though Dufrene believes year-to-year payrolls will likely continue to slow down.

"You can't continue growing at 275,000 jobs per month," Dufrene said, referencing the number of jobs added nationwide in February.

The country is likely to see fewer job openings than in recent years, but that could actually be good news for the stock market.

"That tells the market the Fed is likely to get closer to a cut," Dufrene said.

Earlier this year, the Federal Reserve signaled it could cut interest rates up to three times in 2024. No adjustments have been made, and on Tuesday, Fed governor Michelle Bowman said that due to elevated inflation, she doesn't anticipate any adjustments to rates this year.

But Dufrene believes inflation will ease as the year continues, and that the Fed will cut rates at some point in 2024.

As for the labor market, Dufrene declared that the "Great Resignation is done" as the number of workers quitting their jobs is now lower than pre-pandemic levels. That's a signal of a tightening job market with fewer openings, he continued.

"As workers get less comfortable(that they'll find another job), they're less likely to quit," he said.

Southern Indiana, including Floyd and Clark counties, reported some big drops in employment in the manufacturing and temporary labor sectors in the last quarter of 2023.

"I think this is a general reflection of the overall slowing of the economy we're seeing nationally," he said.

The latest numbers still show low unemployment rates, including 4.1% in the Louisville Metro region and 3.5% in Indiana. Those numbers are up slightly from the same period of 2023.

Dufrene pointed to net migration numbers that show Southern Indiana is projected to continue growing. Southern Indiana accounts for 23% of the Louisville Metro population, but is responsible for 42% of the short-term population growth anticipated for the region.

He credited new amenities and quality-of-life additions for aiding in the population growth.

As for the consumer, Dufrene said studies show some improvement in sentiment compared to 2023. But he added that people naturally don't like high prices.

"Whether you're unemployed or employed, inflation touches everyone," he said.

Other reports are showing increased numbers of credit card and loan delinquencies compared to last year.

"This points to some potential red flags with certain households," Dufrene said.

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