US consumers may be showing signs of stress, but don’t expect them to break in 2024.
That’s the contention from Goldman Sachs chief economist Jan Hatzius.
“At a macro level, if there was only one indicator that I could know regarding the consumer, it would be real disposable household income, and that has been growing at a 4% pace in 2023,” Hatzius told Yahoo Finance Live exclusively at the Goldman Sachs Communacopia conference on Tuesday (video above). “We think 2024 is going to be a little weaker, but we’re still expecting about 3% real disposable household income growth. If that’s right, or even if that’s anywhere close to right, then it’s very difficult to see declines in real consumer spending.”
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Incomes are expected to receive a “boost” from continued increases in monthly job creation and higher yields on interest-bearing assets such as CDs and savings accounts, according to Hatzius.
Hatzius believes the unemployment rate will hold steady in 2024 at around 3.5%, and the economy will create 100,000 jobs a month on average.
“The evidence that has accumulated, especially over the last few months is very much consistent with a soft [economic] landing,” Hatzius added.
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Execs at electronics retailer Best Buy called out rising credit card delinquencies on its earnings call last week. The C-suites at department store players Macy’s (M) and Nordstrom did the same in mid-August.
Online pet retailer Chewy conceded it’s seeing more “discerning” shoppers, a similar tone used by Target when it reported second quarter earnings.
Hatzius agreed that consumer spending will likely be fueled by higher-income consumers in 2024, with more pressure on lower-income shoppers. The consumer’s reaction to the return of student loan repayments this fall is also a wildcard.
“We do think [student loan repayments are] going to be a modest drag on growth in the fourth quarter or maybe in the first quarter [of 2024],” Hatzius said. “It’s going to take a few tenths off the increase in real consumer spending.”