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No Soft Landing: The U.S. Economy is Going to Fall into Recession in the Middle of 2024, Citi’s Chief Economist Says

The soft landing dream is over. Instead, the US economy is headed for a recession in the middle of 2024, according to Citi.

“There’s this very powerful and seductive narrative around a soft landing and we’re just not seeing it in the data,” Citi chief economist Andrew Hollenhorst said in a CNBC interview.

On the surface, the data looks great: the economy is benefiting from historically low unemployment, strong consumer spending, and robust GDP growth.

But there’s more going on with the numbers than meets the eye.

“The question is where are these forward looking indicators showing us that we’re going to go,” Hollenhorst said.

One place the economy is showing a weakness is the labor market. January had a blowout jobs report, adding 353,000 jobs to the economy — but if you scratch beneath the surface, the number of hours worked is falling. The number of full time workers also decreased, and sectors like the restaurant industry have stalled on hiring.

“That’s the key to the economy — what happens in the labor market,” Hollenhorst said. “If the unemployment rate stays low, people continue to spend, the economy holds up. But if that unemployment rate starts rising, which we think it will … that’s the sign that we’re going to have a more material decline in the US economy.”

Hollenhorst also said that inflation is still too high. This week’s CPI data did show a higher-than-expected uptick in monthly inflation, which dragged stocks lower on Tuesday.

Credit card delinquency rates are also rising. Top economist David Rosenberg has said a consumer credit default cycle has already arrived, with one in every twelve credit cardholders missing their payments.

“There may be some consumers out there with excess savings, but those consumers exposed to floating credit card debt with higher rates now, that have been pulling on those excess savings to continue to consume, continue to spend, now those delinquencies are picking up,” Hollenhorst said.

And consumer weakness is also exposing itself in retail sales numbers. Thursday’s release showed a significant drop in activity, posting a 0.8% decline in January.

Hollenhorst isn’t alone in his pessimism. Apollo Management’s Torsten Slk recently echoed the sentiment that a soft landing is now the “least likely” scenario.




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