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Where Will the Economy Go Next? What to Watch For in 2024 Keep your eye on the data in these categories to make more strategic decisions in the new year, according to an economist.

By Daniel Altman Edited by Kara McIntyre

Key Takeaways

  • It may seem like a lot of work to keep track of these economic data, yet a little bit of effort can go a long way.
  • Pick a few indicators that are closely linked to your business, and then ensure that you understand exactly how they're computed and how they're connected to your bottom line.

Opinions expressed by Entrepreneur contributors are their own.

Every week, government agencies and a handful of private companies publish an enormous amount of data on the economy. Each data point means something to someone, but not all of them are relevant for every business. So if we block out the noise, which data will tell us how to navigate the economy this year?

Related: Invest in Growth or Cut Costs? 3 Things Top Companies Do Well Despite Economic Uncertainty

1. Hiring

If you're planning new hires and wondering how much the labor market will loosen up, then you'll probably want to pay attention to the hires and quits data in the government's Job Openings and Labor Turnover Survey. When these rates are elevated, there are lots of opportunities available and people feel confident about switching jobs. Retention is also more difficult in this situation.

When it comes to setting pay, you can use the Employment Cost Index to estimate the current trend. But remember, during periods of high inflation workers will want raises more frequently, so expectations about the path of prices are pivotal. Fortunately, the Federal Reserve Bank of New York keeps track of these expectations with a monthly survey.

2. Costs

Besides personnel, the other big red number on any company's books is the cost of inputs. Knowing how these costs will evolve is critical for budgeting, and data can help here as well. The Producer Price Index keeps track of input costs for a wide variety of commodities and industries, allowing you to look further up the supply chain and predict which increases will be passed down to your business.

You'll also want to keep an eye on energy prices. They can affect costs for almost all goods since energy is usually involved in both production and transportation. One useful bellwether is the price of crude oil futures, which offers hints about where oil prices will go in the near future. Changes in these prices eventually get passed through to refineries, utilities, gas pumps and other end users of fuels and electricity.

Related: 12 Cost-Cutting Strategies to Help You Thrive in a Slow Economy

3. Interest rates

It's also worth watching the paths of several kinds of prices — prices for labor, inputs, leases and energy — to get an idea of what the Federal Reserve is likely to do. If prices start ticking up, long-awaited decreases in short-term interest rates will become less likely.

You can see what the financial markets expect to happen by looking at the yield curve — the string of interest rates for similar securities with different maturities. For example, as of mid-December, the Treasury yield curve suggested that interest rates would drop by more than one percentage point in the coming two years. This is important information to know when planning new investments, especially when financing them with debt.

4. Consumers

The major engine of the economy is consumers — their spending on goods and services is about twice as much as spending by government and businesses put together. During the Covid-19 pandemic, changes in consumer spending send labor markets and the supply chain into a spin. So it's crucial to know what they're going to do next.

In general, consumers keep spending when the labor market is strong. High labor force participation and a low unemployment rate tend to mean healthy bank balances for the majority of Americans. But those bank balances aren't quite as healthy as they were during the pandemic, when workers were able to build up extra savings because they couldn't spend money on all the usual things. The Federal Reserve offers periodic updates on this excess saving, offering an idea of how much extra cash consumers have. Credit card delinquency rates also suggest that consumers may not be as flush.

It's also useful to consider the specifics of consumption. The ratio of spending on services to spending on goods, adjusted for prices, took a big dive early in the pandemic but then partially recovered and leveled out. Now the ratio is only a little bit lower than where the pre-pandemic trend was heading. It looks like there's room for spending on services to recover a bit more, especially if nervousness about a recession dissipates.

Related: Is Inflation Really Cooling Off? In the Current Uncertain Economy, Smart Consumers (and Merchants) Are Adopting These New Habits

5. Currencies

Foreign exchange markets are notoriously difficult to predict, but they affect everything we import and export. In the long term, they depend on economic growth and purchasing power in countries around the world. In the short-to-medium term, they're often driven by supply and demand for currencies that investors can use to buy securities.

Right now it looks like interest rates may come down here before they do in other markets like the European Union, the United Kingdom and Canada. As a result, investors may move some of their money out of the United States to find higher returns elsewhere. A drain of funds would lead to a decline in the value of the dollar and higher import prices in real terms. It would also make American exports less expensive in the rest of the world. But if the stock market launched a big rally, then investors might crowd in again. These are the fine margins that will affect the fortunes of businesses that buy and sell products abroad.

It may seem like a lot of work to keep track of these economic data, yet a little bit of effort can go a long way. The key is to pick a few indicators that are closely linked to your business and then ensure that you understand exactly how they're computed and how they're connected to your bottom line. As we enter another uncertain year, opening your eyes with data is a whole lot better than flying blind.

Daniel Altman

Entrepreneur Leadership Network® Contributor

Chief Economist, Instawork

Daniel Altman is an expert at analyzing and sharing labor market trends, particularly within the hourly workforce. He previously served as an economic advisor in the British government and wrote for The Economist and The New York Times. He received his Ph.D. in economics from Harvard University.

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