Labor market due to hit 'a soft patch': Economist

After stronger-than-expected US GDP growth, Jefferies Senior US Economist Thomas Simons joins Yahoo Finance Live to discuss resilience in consumer spending. He says that despite headwinds, the US consumer seems "back to its old ways in terms of the American spirit" based on robust holiday and recreational activity.

Simons acknowledges "it seems like the consumer should be... ripe for a slowdown." However, he observed the second half of 2023 proved "quite strong," with demand mirroring pre-pandemic norms.

Looking ahead, he expects "we're about to hit a soft patch" in the labor market in 2024 if anticipated consumer pullbacks occur. Simons believes businesses are shifting towards more part-time work rather than layoffs, since employers know "it's really, really hard to find people."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith

Video Transcript

JULIE HYMAN: Let's broaden it out and talk about the US economy, experiencing a faster rate of growth than expected in the fourth quarter, the latest data highlighting consumer resilience despite ongoing concerns of a slowdown.

For more on what the latest signposts indicate about the state of the economy, let's welcome in Thomas Simons, Jefferies Senior US Economist. Thomas, thanks for being here. So your note in reaction to this, I thought was interesting, where you say you were expecting a capital K, maybe now it's a lowercase k. Basically, what you're talking about is the resilience, in particular, of the middle to upper income consumer, if I'm reading it right.

THOMAS SIMONS: Mm-hmm.

JULIE HYMAN: So how strong is that group right now?

THOMAS SIMONS: So for the second half of last year, I think it's undeniable that there were very strong. You know, I mean, we've been looking for this pullback in spending. And you're looking at credit metrics deteriorating and more reliance on things, like buy now, pay later, and just thinking about the accumulated level of inflation that we've experienced over the last couple of years. It seems like the consumer should be sort of ripe for a slowdown.

But instead, the second half of this year was-- was quite strong. We have very strong spending over the summer on recreational activities, and all sorts of other services as the economy really experienced the most normal sort of summer, most-- sort of similar pre-pan-- to pre-pandemic conditions summer that we've seen in four years. And they continue that momentum into the holiday season as well.