Citigroup’s top economist and JPMorgan’s CEO caution about a potential economic downturn as labor market weaknesses emerge. Explore their insights and predictions for the US economy.
United States, Bollywood Fever: Citigroup’s top economist, Andrew Hollenhorst, has raised concerns about the weakening labor market, warning that it could lead to a severe economic downturn, or “hard landing,” for the US economy. Speaking to CNBC, Hollenhorst noted that the deteriorating job market might cause the economy to spiral into a marked slowdown following a period of rapid growth.
While some argue that recent labor market data doesn’t indicate an impending economic crisis, Hollenhorst believes the situation may be less optimistic than it appears. His comments come on the heels of a similar warning from Jamie Dimon, CEO of JPMorgan Chase, who also acknowledged the possibility of a hard landing.
Hollenhorst highlighted several troubling indicators in the labor market, citing data from the National Federation of Independent Business. “Small businesses are telling us that their hiring intentions are at the lowest levels that we’ve seen since 2016,” he said. He also pointed out that the overall hiring rate is currently the lowest it has been since 2014.
Despite the unemployment rate remaining below 4 percent for nearly two years, it has recently risen to 3.9 percent from a low of 3.5 percent earlier this year. “That’s showing us that maybe firms aren’t laying people off yet,” Hollenhorst explained. “But firms are hiring at a lower rate and having workers work fewer hours. This gradual softening has already started and tends to snowball into a hard landing.”
Hollenhorst predicted that if the unemployment rate exceeds 4 percent, the Federal Reserve might begin cutting interest rates as soon as July. However, the latest minutes from the Federal Reserve’s meeting revealed growing concerns about inflation, with some policymakers hesitant to ease monetary policy. The central bank recently decided to hold borrowing rates steady at a 23-year high of between 5.25 and 5.5 percent.
Hollenhorst emphasized that the extended period of high interest rates is beginning to impact businesses, with rising prices and dwindling savings contributing to the slowdown. “We’re seeing that in corporate earnings, with retailers talking about needing to lower prices. This strong engine of consumption and demand finally seems to be slowing,” he noted.
Echoing these concerns, JPMorgan CEO Jamie Dimon also warned of a possible hard landing for the US economy during a CNBC interview. “Could we actually see one? Of course,” Dimon said, citing historical precedents. He also highlighted the risk of stagflation, where inflation rises alongside high unemployment and slowed growth, a scenario last seen in the 1970s. Dimon remarked, “The worst outcome for the US economy would be stagflation.”
Despite the dire warnings, Dimon noted that consumers are currently “in pretty good shape” and might remain so even if the economy slips into a recession. However, JPMorgan’s chief market strategist, Marko Kolanovic, issued a note predicting a potential 20 percent drop in the S&P 500 to 4,200 by the year’s end.
As concerns about the US economy’s future grow, these warnings from prominent financial leaders underscore the need for close monitoring of labor market trends and the broader economic landscape.
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