Citi’s chief US economist, Andrew Hollenhorst, has shattered the illusion of a soft landing, predicting a recession for the US economy by mid-2024.

Data Contradicts Surface Positivity

Despite positive indicators like historically low unemployment rates, robust consumer spending, and strong GDP growth, Hollenhorst warns that beneath the surface, the economic data tells a different story.

Labor Market Weakness

Hollenhorst points to weaknesses in the labor market as a significant concern. While January saw impressive job additions, a closer look reveals declining hours worked, reduced full-time employment, and stalled hiring in sectors like restaurants.

Unemployment Rate and Spending

The key to economic stability lies in the labor market. Hollenhorst emphasizes that if the unemployment rate remains low and consumer spending persists, the economy will stay afloat. However, an anticipated rise in the unemployment rate signals a looming downturn.

Persistent Inflation

High inflation rates remain a cause for concern, with recent data from the consumer price index indicating a higher-than-expected monthly increase, leading to a dip in stock prices. Rising credit-card delinquency rates, as noted by economist David Rosenberg, further exacerbate economic pressures.

Consumer Weakness Evident

Consumer weakness manifests in declining retail sales, as evidenced by a significant 0.8% drop in January activity. This decline underscores the broader challenges facing the economy.

Pessimism Echoed

Hollenhorst’s pessimistic outlook is shared by others, with Torsten Sløk of Apollo Management suggesting that a soft landing is now the least likely scenario.

As economic indicators signal potential trouble ahead, the US economy faces mounting challenges that may culminate in a recession, challenging the narrative of a smooth economic transition.