No soft landing: The US economy is going to fall into recession in the middle of 2024, Citi’s chief economist says.

No soft landing: The US 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, Citi says.

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

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 Hollenhorst noted that if you scratch beneath the surface, the number of hours worked is falling, the number of full-time workers has decreased, and sectors such as 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 he added that the unemployment rate was expected to start rising, which would be “the sign that we’re going to have a more material decline in the US economy.”

Hollenhorst also said inflation was still too high. This week’s data from the consumer price index did show a higher-than-expected uptick in monthly inflation, which dragged stocks lower on Tuesday.

Credit-card delinquency rates are also rising. The top economist David Rosenberg has said a consumer credit default cycle has already arrived, with one in every 12 credit-card holders missing their payments.

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.