Citigroup's Chief US Economist predicts a hard landing for the US economy, driven by weakening labor markets and potential Fed rate cuts.
In a recent interview with CNBC, Citigroup's chief US economist Andrew Hollenhorst expressed concern over the state of the US labor market and predicted a "hard landing" for the economy. Hollenhorst pointed to a gradual softening in job market indicators, such as hiring intentions among small businesses reaching their lowest level since 2016, and the overall hiring rate falling to its lowest since 2014, based on data from the National Federation of Independent Business (NFIB).
Hollenhorst's assessment comes amidst a backdrop of a national unemployment rate that has slightly increased from a low of 3.5% to about 3.9%. According to Hollenhorst, this shift, although subtle, is significant. He suggested that this trend could result in the Federal Reserve cutting interest rates, predicting as many as four rate cuts before the end of 2024, starting as early as July.
Other analysts, including Danielle DiMartino Booth, have also suggested that labor market deterioration could signal an oncoming recession. Hollenhorst argued that the Federal Reserve's policy of maintaining higher interest rates for an extended period might be starting to impact corporate earnings, especially as consumer savings have been depleted.
During the CNBC interview, Hollenhorst elaborated on his views, explaining that while certain labor market reports like the establishment survey payroll data report strength, a closer look at small and medium firms reveals more worrying trends. He believes that the decrease in working hours and the slowing hiring rates could snowball into a more severe economic downturn.
Hollenhorst also addressed the current state of fiscal spending and its impact on the economy, acknowledging that it has been challenging to forecast economic outcomes due to the significant amount of fiscal spending.
Citigroup's chief US economist Andrew Hollenhorst has presented a somber forecast for the US economy, emphasizing concerns over a weakening labor market that could lead to a hard landing and potential interest rate cuts by the Federal Reserve.
