C&D World 2024: Economist predicts a ‘year of normalization’ in 2024

In his 2024 C&D World Conference & Exhibition keynote session, Bill Adams, chief economist for Comerica Bank, provided a 2024 economic outlook for the construction and demolition (C&D) industry, telling attendees they can expect a “year of normalization.”

In 2024, the U.S. should see normalization of economic growth, job market, inflation and interest rates, Adams said.

“The big question for this year is when will inflation get back to normal? And how quickly can that happen?” Adams said.

The job market cooled in 2023, creating a better balance between supply and demand, and wages are growing faster than prices. Wage growth is moderating but still growing faster than before the pandemic, with incomes outpacing inflation and bolstering household finances, he added.

“That means real spending power on behalf of the American consumer,” Adams said.

On the supply side, the biggest contribution to labor force growth in the U.S. is immigration, Adams said. Meanwhile, after several years inflation has fallen to near the Federal Reserve’s target, with the falling prices of durable goods and energy in late 2023 bringing down inflation rates.

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Housing prices and shelter services play a big part of core consumer prices and 2024 will see slower inflation in those areas, Adams said, adding that the housing market is near balance with less supply as well as less demand. While newly built home sales have stabilized, existing sales are still in a deep freeze. Meanwhile, a wave of new multifamily housing units are currently under construction and will come to market in 2024.

Adams said to expect to see 2024 growth in nonresidential construction, including factories, infrastructure and warehouses. Underutilized office space across the U.S. will need to be repurposed. Housing in the sunbelt and places with flexible zoning could grow.

In terms of interest rates, Adams reported, the Federal Reserve is likely to cut the interest rate by the second quarter. Comerica forecasts at least three quarter-percentage point Fed funds rate cuts in 2024. Additionally, he said, the Fed will likely slow its balance sheet reduction in the second half of 2024.

A fiscal crisis is very unlikely near-term, Adams said. “The risk of a recession over the next 12 months is lower than the risk of a recession was at the beginning of 2023.”