Sept. 12, 2024 — The U.S. economy is showing signs of stability as it navigates slower growth and cooling inflation, according to Jack Kleinhenz, chief economist for the National Retail Federation (NRF). Kleinhenz states that despite recent economic concerns, the country appears to have avoided a recession.
“The U.S. economy is clearly not in a recession nor is it likely to head into a recession in the homestretch of 2024,” says Kleinhenz. “Instead, it appears that the economy is on the cusp of nailing a long-awaited soft landing with a simultaneous cooling of growth and inflation.”
In August, early reports indicated rising unemployment and a manufacturing slowdown, leading to concerns about economic deterioration. However, more recent data suggests a more stable outlook, according to the NRF. Kleinhenz notes that while the labor market could weaken further, the risk of a recession has diminished.
According to the September issue of NRF’s Monthly Economic Review, the revised gross domestic product growth for the second quarter of 2024 was raised to 3%, up from the original estimate of 2.8%. Consumer spending was also revised from 2.3% to 2.9% growth for the quarter.
Inflation, as measured by the Personal Consumption Expenditures Price Index, remained at 2.5% in July, a slight increase from the Federal Reserve's 2% target but unchanged from June.
Kleinhenz highlights the state of the labor market, noting that only 114,000 jobs were added in July, below expectations, while the unemployment rate rose to 4.3% from 4.1%. Despite this, Kleinhenz shares the unemployment rate remains within a typical range.
In August, Fed chairman Jerome Powell indicated that interest rate cuts were likely on the horizon, with an announcement expected this month. Kleinhenz warns that while lower rates would be welcomed, the effects might take time to impact the broader economy.
Looking ahead, Kleinhenz shares that lower interest rates could ease financial pressure on households, especially those with mortgages, car loans, and credit card debt. The housing market, in particular, could benefit from reduced borrowing costs. Small businesses may also see reduced financing costs, potentially leading to new investments or hiring.
“While consumers will continue to be savvy about their purchases, these factors are a welcome development and should support their propensity to spend,” says Kleinhenz.