As the U.S. economy transitions to slower growth, I observed as a Wisconsin corporate attorney that most businesses, including Wisconsin law firms, are concerned about three factors for the rest of 2024:

• whether the Federal Reserve would be able to bring the inflation rate to the 2% generally acceptable level;
• whether the U.S. would be able to avoid a recession; and
• whether businesses can reduce costs and increase productivity by incorporating artificial intelligence (AI) into their workflows.

Certainly, while the work of lowering inflation is not done, lowering the rate to 2% will likely require the interest rate to stay higher for longer.

Concerns About Inflation in 2024

Although businesses are justifiably concerned about whether inflation will be sticky, one way the U.S. government can lower inflation to the 2% generally acceptable rate is by increasing domestic production of crude oil. This would, in turn, likely push the Brent Crude below $73 per barrel and reduce the costs of domestic production of goods and services.

Moreover, inflation will likely subside to 2% when the unemployment rate increases above 5%. Further (though unlikely) the Federal Reserve could increase the interest rate again to prevent inflation from getting sticky.

Because businesses are worried about how the inflation rate and a possible recession would impact them, it is likely to chill the deal market – leading to layoffs, slower corporate matters, and deal volumes for law firms.

AI and Cost Reductions

To increase productivity and prepare for any possible recession, many businesses – including law firms – have resorted to reducing costs while incorporating generative artificial intelligence (AI) into their workflows.

Additionally, many companies, including Wisconsin law firms, have attributed corporate job cuts this year to doing more with fewer workers by reducing costs, reorganizing, and incorporating AI into their workflows.

Moreover, AI-related job cuts will likely continue to grow this year and beyond as AI gets smarter and as many jobs become automated.

Thus, to do more with less and to reduce costs, some corporate jobs will likely be automated by AI – leading to more job losses, which may increase the possibility of the U.S. going through a recession later in 2024 or early 2025.

Job Market Uncertainty Outlook

This job market uncertainty will likely continue in 2024 and into early 2025.

For instance, tech layoffs – which included Meta Platforms (Facebook), Amazon, Google parent Alphabet, Microsoft, and Spotify, – dominated 2023-24. In fact, downsizing went beyond the tech industry, with retailers, manufacturers, and financial sectors such as Citigroup and the big four accounting firms – Deloitte, Ernst & Young, KPMG, andPwC (also known as PricewaterhouseCoopers) – announcing cuts.

The only bright spot in the private-sector job market where many jobs were created in 2024 are from two sectors: private education and health care, and leisure and hospitality. Much of the work in these two sectors must be done in person, which requires face-to-face interactions.

Therefore, while the job market uncertainty will likely continue into early 2025 – since businesses will continue to cut jobs as they incorporate AI into their workflows and some jobs will be automated – jobs that require face-to-face interactions will be hard to cut.

Conclusion

In short, while slower corporate matters and deal volumes for law firms will likely continue, the possibility of the U.S. experiencing a recession in 2024 will accelerate that, businesses will continue to incorporate AI into their workflows while reorganizing and cutting more jobs, and corporate matters and deal volumes will likely return to pre-pandemic levels in 2025.​

This article was originally published on the State Bar of Wisconsin’s Business Law Blog. Visit the State Bar sections or the Business Law Section webpages to learn more about the benefits of section membership.