Shoppers are still willing to buy even as smaller job and wage gains and high interest rates are slowing the growth of consumer spending, National Retail Federation Chief Economist Jack Kleinhenz said.
“U.S. economic growth for the remainder of this year will depend on several factors but particularly the pace of job growth, inflation and what actions will be taken by the Federal Reserve,” Kleinhenz said. “The good news is that the economy is growing, inflation is moderating, and overall fundamentals look fine as increased consumer spending supports underlying momentum.”
Kleinhenz’s comments came in the June issue of NRF’s Monthly Economic Review, which said gross domestic product is still expected to grow about 2.3% over 2023 but that employment is now expected to grow by an average 180,000 jobs a month, about 50,000 higher than expected this spring. Inflation as measured by the Personal Consumption Expenditures Price Index should drop to about 2.2% by the end of the year, close to the Federal Reserve’s target of 2%.
“The biggest change in the economic outlook since our initial projections is that immigration has been much stronger,” Kleinhenz said, noting that the Congressional Budget Office now estimates that net immigration last year was 3.3 million, more than triple the previous estimate of 1 million.
“New immigrants have increased the supply of workers, raising production capacity, closing some shortages in the labor market and allowing the economy to generate jobs without overheating and accelerating inflation.”
The availability of more workers, particularly in low-wage jobs, can help limit wage-driven inflation, and increased immigration “explains some of the surprising strength in consumer spending since 2022,” Kleinhenz said.
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