b"(continued from page8)Low unemployment may fuel happy sentiments Will that de-escalation of interest rates be enough toamong citizens, but it presents employers with two keep the natin from tipping into a recession? Moodyspractical challenges. The first is the need to raise Analytics believes that the nation will avoid awages to attract sufficient workers. Wage and recession in 2024, attributing its forecast of a softsalary income growth has been strong, fueled by a landing to resilience in labor markets and consumertight labor market, said Hoyt. We're expecting it to confidence.increase just a shade over 5% both for 2023 and 2024. In 2022 the growth was a little over 8%. Basu, however, is among the economists taking aReinforcing the estimates of the economists, Palisin contrary view. I believe the US economy will be insaid his members have had to hike their recession by at some point in 2024, he said. Acompensation to remain competitive among number of factors, including a very strong consumerthemselves and other economic sectors. The groups and employers willing to hire more people and raiseentry level hourly wages increased an eye-popping wages, have allowed the US economy to retain8% to 10% in both 2022 and 2023, far higher than momentum. But major structural issues suggest thethe historic average of 2.5% to 3.0%. economy will weaken, including those higher interestHousing markets rates.Given the generally upbeat consumer sentiment, prospects are good for the housing sector, an Feeling goodimportant driver of the overall economy. New The public mood is a strong driver of the economy.home sales are running at the top end of the range And here the news is good. Consumer confidence hasset in the decade preceding the pandemic, said been trending higher, and I think prospects are goodYaros. One reason is that a lack of existing for it to improve next year, said Scott Hoyt, Seniorinventory is pushing buyers to consider new homes. Director of Consumer Economics for MoodysThe construction industry is stepping in to close the Analytics (economy.com). Things should normalizegap, and housing starts have exceeded expectations. as the economy continues to grow and gas pricesThe construction of new homes is being fueled by a stabilize.cold hard fact: There arent enough existing homes to meet demand. The 3.1 months supply of An impressive level of accumulated debt, though, isexisting homes remains well below the four to six hanging like a dark cloud over the consumermonths of inventory that is considered a balanced landscape. With credit card debt now above a trillionhousing market, noted Yaros. Strong demand dollars with more consumers having to start payingcaused a 10.3% increase in the median price for back student loans and with evidence of slowing laborexisting homes in 2022, and a 0.6% increase in markets becoming more pervasive, there's every2023. A correction of 1.1% is expected in 2024. reason to believe that the pace of consumer outlayFor an explanation of the scarcity, look no further growth will soften going forward, said Basu. than the run-up in mortgage rates. The ultra-low For the immediate future though, consumer confi- interest rates of existing mortgages amount to a dence seems secure, due primarily to the healthy jobstrong financial incentive for existing homeowners market. The unemployment rate has been very low,to stay put. Current homeowners had refinanced bouncing around between 3.5% and 3.8% for sometheir investments at 3% or 4%, noted Bill Conerly, time, said Hoyt. A slowdown in job growthPrincipal of his own consulting firm in Lake orchestrated by the Federal Reserves interest rateOswego, Oregon (conerlyconsulting.com). hikes should moderate things. We thinkReplacing what they had with better homes would unemployment will trend upward a bit, ending 2023require walking away from those mortgages to take around 3.9% and 2024 around 4.2%. (Manyon new ones at 7%. I think well see this trend economists peg an unemployment rate of 3.5% tocontinue for another year, but I think we'll also see a 4.5% as the sweet spot that balances the risks oflot of strength in remodeling, and that will be wage escalation and economic recession.)financed probably with home equity lending or second mortgages. (continued to page19) 11"