Real disposable household income, which has been increasing at a 4% pace in 2023, is the only indicator of the consumer that I could use at the macro level, Hatzius exclusively told Yahoo Finance Live on Tuesday at the Goldman Sachs Communacopia conference (see video above). “We anticipate real disposable household income to expand by roughly 3% in 2024, notwithstanding our prediction that the year will be somewhat weaker. Real consumer spending losses are very difficult to discern if that’s accurate or even close to accurate.
According to the most recent data from Hatzius, consumers will perform better in 2019 despite continued solid income growth.
According to Hatzius, increased monthly job growth and greater rates on interest-bearing assets like CDs and savings accounts are likely to “boost” incomes.
According to Hatzius, the unemployment rate will remain at roughly 3.5% in 2024, and the economy will typically add 100,000 jobs each month.
“The evidence that has accumulated, especially over the last few months, is very much consistent with a soft [economic] landing,” continued Hatzius.
The more optimistic reading on consumers comes as the effects of the Fed’s interest rate increases start to spread throughout the economy, reduce consumer spending, and put pressure on household finances.
On its earnings call last week, executives at electronics retailer Best Buy (BBY) criticised the rising credit card delinquencies. Mid-August, the executive teams of major department store competitors Macy’s (M) and Nordstrom (JWN) followed suit.
In a similar vein to Target (TGT), which released its second quarter results report, online pet retailer Chewy (CHWY) acknowledged that it is encountering more “discerning” customers.
Hatzius concurred that higher-income individuals will probably drive consumer spending in 2024, putting more pressure on lower-income consumers. Another unknown is how consumers will respond when student loan installments resume this autumn.
In the fourth quarter, or possibly the first quarter [of 2024], “we do think [student loan repayments] are going to be a modest drag on growth,” Hatzius added. It will reduce the increase in real consumer spending by a few tenths.