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What’s next for jobs, stocks, wealth creation? Experts comment on current, future trends

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What’s next for jobs, stocks, wealth creation? Experts comment on current, future trends

Current economic trends could continue into 2025, with a stable job market amid some cost-cutting. On the investment side, strong gains for housing and stocks are widening the have/have-not divide.

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With three months to go, 2024 has turned out to be a relatively good year economically, with low unemployment, declining interest rates, easing inflation and gains for people owning stocks and real estate.

Here are some of the key trends that might carry forward to 2025, or beyond:

Economists issue a mostly all-clear update

No recession appears to be in the cards through 2024 and possibly longer. The latest assessment of a soft landing comes from an economic advisory panel of the American Bankers Association. The 15 bank chief economists in this group expect the economy to grow 2% over the second half of 2024 and in 2025. They view near-term recession risks at 30%, unchanged from their prior semiannual forecast in March.

Among risks, the economists point to a softer labor market, with fewer openings and a modest uptick in layoffs. The nation’s unemployment rate has risen from 3.4% at the beginning of 2023 to 4.2% in August 2024. The economists expect that it will rise to 4.4% in early 2025. They also anticipate inflation will continue to ease and hit the Federal Reserve’s 2% target by the second quarter of 2025. And they expect further interest rate cuts through 2025.

Homeowners, meanwhile, should expect slower price gains ahead, with economists predicting home-price appreciation will ease from 6.8% in this year’s second quarter to 3.1% by the fourth quarter of 2025. This trend will be accompanied by a gradual decline in mortgage interest rates, they say.

Fed Chair Jerome Powell: ‘Growing confidence’ inflation cooling, more rate cuts possible

Investment gains widen the have/have-not divide

This has been a year of rising personal wealth, with no signs of it abating. But the gains haven’t been shared equally, with the gap widening between the haves and have-nots, noted David Kelly, chief global strategist at J.P. Morgan Asset Management, in a recent commentary.

Kelly estimates that the net worth of American households has risen to a record $157 trillion, or $446,000 per person on average. That’s up by 47% or $50 trillion over the past five years. Rising stock prices have driven much of this wealth increase. Corporations have been posting higher profits that reflect, in part, “more favorable tax treatment, declining inflation and interest rates and diminished union power.”

While the stock market has generated most of the wealth gains, the nation’s 87 million homeowners now, on average, sit on about $400,000 in home equity compared to $240,000 five years ago.

These broad wealth gains are helping to sustain consumer spending and keep the economy moving forward. They also are helping to mute credit problems and ease worries about retirement for millions of people.

But the gains haven’t been distributed evenly. Renters, for example, have not benefitted from rising home prices. Also, federal government debt has surged, Kelly noted, and that’s something Americans eventually will need to repay, at least in part, through taxation. In addition, the stock-market surge has attracted foreign capital, contributing to a strong dollar and an ongoing U.S. trade deficit, Kelly said. That tends to undermine manufacturing jobs in this country.

If the trend toward greater inequality continues, it could worsen populist politics and “lead to decisions that are damaging both to the economy overall and wealth accumulation in particular,” Kelly wrote.

September jobs data: Blowout jobs figures points to solid economy and slower Fed rate cuts, analysts say

Workplace survey points to modest cost-cutting

Jobs have been plentiful in recent years and workplace policies fairly benign, but employees should brace for a bit tougher slogging ahead.

One trend noted in a recent survey of executives involves more companies, roughly one in three, implementing or planning layoffs. Some firms also are requiring employees to return to offices. This coincides with cost-cutting measures such as reduced travel budgets, which remain prevalent but haven’t noticeably risen over the past year, according to the survey of 182 human-resources executives by Challenger, Gray & Christmas.

About one-third of the executives surveyed said they’re worried about “quiet quitting” where employees disengage or do minimal work without resigning. But many of the executives said they had no concrete evidence of that happening or declining productivity, according to the survey, which was conducted in July and August.

The executives surveyed acknowledged that employees greatly value flexibility in terms of remote or hybrid work. “About 54% of companies continue to offer hybrid or fully remote work options, demonstrating that flexibility is here to stay,” said Challenger, Gray & Christmas.

A strong stock market enters historically weak month

The stock market has been on a roll lately, but it has a reputation for not faring well in October, especially when there’s a presidential election pending. October can evoke fear on Wall Street as memories are stirred of sharp losses in 1929, 1987, 1997, 2008 and other years, wrote Jeffrey Hirsch, editor of the 2024 edition of the “Stock Trader’s Almanac.” In a recent blog, he didn’t provide an explanation for October’s historic weakness, other than noting some of those sharp declines in past years.

Yet despite October’s reputation for being a down month, many of the results for October have been more so-so than miserable, even during election years. Over the past 18 Octobers that preceded elections since 1950, stocks in the S&P 500 index were up nine times and down nine times, for an average loss for the month of 0.9%, according to Hirsch.

Viewed differently, October sometimes marks the last downward leg before a rally commences. Since World War II, stocks reversed course 13 times during October, ending what had been downward or bear markets during those years and embarking on a new upward trend.

Reach the writer at russ.wiles@arizonarepublic.com.

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