According to Andrew Hollenhorst, the chief US economist at Citigroup, a deteriorating labor market is likely to cause a quick decline in the US economy. He believes that an abrupt economic downturn is expected later this year due to fewer firms hiring and workers working fewer hours. Recent labor-market data does not necessarily indicate such a dire situation, but some reports suggest a more pessimistic environment than many realize.
Survey data from the National Federation of Independent Business indicates that hiring intentions at small businesses are at their lowest level since 2016, and the overall hiring rate is the lowest it has been since 2014. These factors contribute to a concerning outlook for the economy, as recent data indicates a sharp drop in small business hiring intentions. Despite the national unemployment rate remaining around 3.9%, it has increased from its previous low of 3.5%, which could prompt the Federal Reserve to lower interest rates as early as July if unemployment surpasses 4%.
Other analysts have also raised concerns about a hard landing due to labor-market deterioration. There are fears that weaker economic activity, combined with the Fed’s interest-rate policy and consumer savings depletion, could lead to a recession. Hollenhorst predicts four cuts may occur before the end of 2024. His assessment is supported by signs of a hard landing and deteriorating economic conditions, making it crucial for policymakers to take action to prevent an economic downturn.
In conclusion, while recent labor-market data does not necessarily indicate such a dire situation, some reports suggest that there may be more pessimistic factors at play than many realize. As such, it is important for policymakers and economists alike to pay attention to these indicators and take action before an economic downturn occurs.
