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10 4 rectified. While this adjustment will not determine the overall pace of growth, it may intensify effects of the economic slowdown in larger metropolitan areas. The unemployment rate will rise modestly, from 3.6 percent in 2023 to 4.2 percent in 2024, (above the economy's full employment unemployment rate of about 4 percent) which will lessen pressures on wages and benefits. Accordingly, we expect less traction for wage-push inflation, and if so, the Federal Reserve should be able to slowly relax its very restrictive policy stance. With the unemployment rate slowly rising, the balance of power will gradually shift to employers, who will find it a little easier to reload their workforces. Nonetheless, widespread recognition that labor markets will be tight over the next decade due to slower growth of the working-age population will sharply limit layoffs in 2024. Workers of nearly all types will be in short supply due to countervailing demographic trends. So, unless foreign immigration increases, a shortage of workers could be a feature of the post-pandemic economy. This may be good for an eventual rebalancing of income from capital to labor, which should help to reduce inequalities in income. Housing High mortgage rates and the recent run-up in home prices dramatically reduced housing affordability, which put the nation's housing industry into recession. Strong labor market conditions and a scarcity of single-family homes for sale reduced the severity of the housing recession, however. More positively, this severe shortage increased demand for rentals, which also became more expensive. It is likely that the pandemic caused a structural shift that favors owner-occupied housing. Working remotely, online education, more caregiving at home, and simply staying at home became very important, and the coming economic slowdown will not change this. Homes therefore are intrinsically more valuable than traditional metrics show. The pandemic also caused many older homeowners to stay put , postponing their moves to retirement communities or assisted living facilities. Thus, there were fewer existing homes on the market to satisfy buyers' needs. Another reason home prices will not decline too much is that the Great Recession destroyed much of the supply chain for new home construction and forced many workers to permanently quit the construction trades. As a result, the housing shortage will persist in 2024. Home prices will hold steady —or at worst—drop very slightly due to both higher mortgage rates and recent sharp price increases. According to the National Association of Realtors, single-family homes were 37 percent less affordable in mid-2023 than in 2021. Another factor is that homes are overvalued by as much as 16 percent, according to Moody's Analytics. So, without strong income growth and/or substantial reductions in mortgage interest rates, home prices are unlikely to rise and may decline, and neither of these driving factors are likely in 2024. Nonresidential Construction Overall spending for new nonresidential construction will increase but will lack vigor because interest rates are high, uncertainty is high, top-line sales growth will slow, vacancy rates are high, and net absorption will be negative for office and retail space.

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