Citigroup's Chief US Economist, Andrew Hollenhorst, has issued a warning that a deteriorating labor market could lead to a rapid downturn in the US economy and possibly face severe challenges.

Hollenhorst noted that the current pace of hiring within companies is sluggish, and employee working hours are also decreasing, indicating a gradual deterioration in the labor market, a trend that could result in a severe "hard landing" for the economy.

While recent labor market data may not have foreshadowed such dire outcomes, Hollenhorst pointed out that some reports reveal a more pessimistic environment than is widely recognized. He cited survey data from the National Federation of Independent Business (NFIB) showing that hiring intentions among small businesses are at their lowest levels since 2016, with overall hiring rates also at their lowest in a decade.

Although NFIB's data may be temporary, the recent significant declines are still noteworthy. Despite the national unemployment rate remaining around 3.9%, a significant change from the previous 3.5% has occurred. He predicts that if the unemployment rate rises to over 4%, it could prompt the Federal Reserve to start cutting interest rates from July, with expectations of four rate cuts by the end of 2024.

Other analysts have also expressed concerns about the deterioration of the labor market. Senior forecasting expert Danielle DiMartino Booth stated that an unemployment indicator suggests that an economic recession is already underway.

Hollenhorst also pointed out that the prospects of an economic hard landing and sluggish economic activity increase the likelihood of a rate cut in July. The Federal Reserve's long-standing high-interest rate policy is eroding business profits while consumer savings are dwindling.