“It seems that the economy is on the cusp of nailing a long-awaited soft landing,” stated Jack Kleinhenz, chief economist for the National Retail Federation.
Washington According to Jack Kleinhenz, chief economist for the National Retail Federation (NRF), the United States appears to have “dodged a recession” with the economy “slowing but still growing” and inflation declining as the Federal Reserve gets ready to cut interest rates.
According to Kleinhenz, “the U.S. economy is clearly not in a recession nor is it likely to head into one in the final months of 2024.” Rather, it seems that the economy is about to have a much-needed gentle landing along with a concurrent decline in prices and growth.
Even though August was “eventful,” with initial reports of increased unemployment and a manufacturing slowdown, subsequent data has “calmed fears of a deteriorating U.S. economy.”
A recession is far less likely, Kleinhenz continued, “but concerns are currently focused on the direction of the labor market and the possibility of a job market slowdown.”
According to Kleinhenz, the second quarter’s annualized gross domestic product growth was raised up to 3 percent from the initial report of 2.8 percent in the September issue of the NRF’s Monthly Economic Review. The largest component of GDP, consumer expenditure, saw an increase in growth for the quarter from 2.3 percent to 2.9 percent. Despite the fact that spending slowed down this year after picking up speed in the second part of 2023, “the American consumer has been resilient.”
The Fed’s favored measure of inflation, the Personal Consumption Expenditures Price Index, showed year-over-year increase of 2.5 percent in July, hardly changed from June and just half a percentage point above the objective of 2 percent.
According to Kleinhenz, the labor market “is not terribly weak,” but it “is showing signs of tottering.” Less than anticipated, only 114,000 new jobs were created in July, and the unemployment rate increased to 4.3 percent from 4.1 percent in June. According to Kleinhenz, the unemployment rate is still within a normal range despite the increase.
According to Kleinhenz, the “keynote event” of August was Federal Reserve Chairman Jerome Powell’s statement that “the time has come” for lower interest rates. A cut is generally anticipated when the Fed meets this month to discuss rates.
According to Kleinhenz, “the guessing game on the extent and frequency of rate cuts and how far the federal funds rate will be reduced now begins.” “While reducing interest rates would be welcome, it will take time for the economy as a whole and the various lending channels to absorb rate reductions. As a result, a cut is anticipated to stabilize the existing situation rather than immediately boost the economy.
According to Kleinhenz, going forward, lower rates ought to help households that are already struggling because of loans taken out for necessities. Reduced interest rates will also make borrowing more accessible for credit cardholders, home improvement loans, auto loans, and mortgages, which will promote spending and raise the demand for goods and services. Given that the housing market is “probably the most rate-sensitive sector,” it stands to gain in particular. Small enterprises could take out new loans to expand their workforce, buy machinery and plants, or pay down existing debts more cheaply.
The NRF projected that employers would continue to add jobs throughout the remainder of the year, albeit more slowly than they had earlier in the year; price increases for goods and services appear to be stabilizing; unemployment is close to record low levels; and the Fed is anticipated to lower interest rates at least twice.
Kleinhenz said, “These factors are a welcome development and should support consumers’ propensity to spend, even though they will still be wise about their purchases.”
