The American consumer will not be broke in 2024
US consumers may be showing signs of stress, but don’t expect those signs to reverse in 2024.
This is the claim of Goldman Sachs chief economist Jan Hatzius.
“On a macro level, if there’s only one indicator I can figure out in terms of the consumer, it’s real disposable household income, which is growing at 4% in 2023,” Hatzius told Yahoo Finance Live EXCLUSIVELY at the conference. Goldman Sachs Communacopia conference on Tuesday (video above). “We think 2024 will be a little softer, but we still expect real household disposable income growth of 3%. If that’s true, or even if that’s close to true, it’s very difficult to see declines in real consumer income.” spending.”
The latest research by Hatzius finds that consumer performance will outperform in the coming year amid more healthy gains in income.
Income is expected to receive a “boost” from continued increases in monthly job creation and higher returns on interest-bearing assets such as CDs and savings accounts, according to Hatzius.
Read more: How to find the best CD prices for September 2023
Hatzios believes that the unemployment rate will remain stable in 2024 at around 3.5%, and the economy will create 100,000 jobs per month on average.
“The evidence that has been accumulating, especially over the past few months, is very consistent with a soft (economic) landing,” Hatzios added.
The more optimistic reading on the consumer comes as the impact of interest rate hikes by the Federal Reserve on the economy and begins to reduce purchasing power and pressure on household finances.
Electronics retailer Best Buy (BBY) executives called out rising credit card delinquency rates on its earnings call last week. The executive wings at department store operators Macy’s (M) and Nordstrom (JWN) did the same in mid-August.
Online pet retailer Chewy (CHWY) admitted it’s seeing more “distinguished” shoppers, a similar tone used by Target (TGT) when it reported second-quarter earnings.
Hatzius agreed that consumer spending is likely to eat away at higher-income consumers in 2024, with more pressure on lower-income shoppers. Consumer reaction to student loan repayments this fall is also unpredictable.
“We think (paying off student loans) will be a modest drag on growth in the fourth quarter or possibly the first quarter (of 2024),” Hatzios said. “It will take a few tenths of the increase in real consumer spending.”
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Brian Suzy He is the Executive Editor of Yahoo Finance. Follow Suzy on Twitter @ Brian Suzy and on linkedin. Tips on deals, mergers, activist positions, or anything else? Email brian.sozzi@yahoofinance.com.
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