Should We Be Worried About a 2024 Recession?

At the start of 2023, many people were worried about an economic recession. Thankfully, that didn't come to pass. But now that we're further along into 2024, some may be worried about the potential for a downturn to occur this year.

Without a crystal ball, we can't say with certainty that a recession won't hit in 2024. But based on what we know now, it's not so likely. Here's why.

Unemployment is low

In January 2024, the U.S. economy added more than 350,000 new jobs. And the unemployment rate held steady at 3.7%, which is low, historically speaking. 

This doesn't mean layoffs didn't make the news during the first couple of months of the year. But generally speaking, the labor market is strong and jobs are available. 

Consumer spending may hold steady

Last month, Fitch Ratings reported that consumer spending was resilient in 2023 despite higher borrowing rates. The agency also projected a modest uptick in spending for 2024. And if consumers continue to spend at a steady pace, that alone could be enough to avert a recession. 

Rate cuts could be in store

The Federal Reserve is expected to start cutting interest rates at some point in 2024. Once that happens, consumers looking to borrow money in loan or credit card form may be in for some relief. That could lead to an additional increase in spending. 

A recession, by contrast, often comes as a result of a notable decline in consumer spending. A big reason so many experts initially warned of a 2023 recession was that the Fed had begun raising interest rates to cool inflation in 2022. But if 2023's economy managed to stay recession-free, it stands to reason that we're even less likely to encounter a recession at a time when borrowing may become less expensive. 

Prepare for a recession just in case

Even though there's no reason to expect a recession in 2024 at this point, you never know when economic circumstances might change. So a smart move is to prepare your finances for a recession in case one occurs.

One of the most important steps you can take to get ready for a recession is to build or boost your emergency fund. Aim for enough money in your savings account to cover three full months of essential expenses at a minimum.

Next, try to eliminate as much high-cost debt as possible. If a recession hits and it impacts your job, you may end up without a paycheck for a while. It would be a good thing to not have costly debt payments hanging over your head during a time like that (or to at least have fewer or lower debt payments). 

Finally, aim to boost your job skills. This won't guarantee that you won't end up falling victim to layoffs, but it may lower your chances. The more value you bring to your employer, the harder it may be for it to let you go.

The idea of a 2024 recession may seem scary, but thankfully, there are no major warning signs pointing to one at present. That said, we can't see into the future, so it's best to be recession-ready, just in case.