In a contrarian view, Citi's Chief U.S. Economist, Andrew Hollenhorst, has expressed concerns over a hard landing for the U.S. economy, predicting that the Federal Reserve will need to implement four benchmark rate cuts this year. While the consensus has been leaning towards a soft landing, where the economy slows but avoids a recession, Hollenhorst argues that inflation and a weakening labor market will necessitate more aggressive rate cuts than expected by Wall Street.

Hollenhorst's warning gained credibility when the recent Labor Department payroll report revealed a sharp decrease in job growth in April, adding only 175,000 jobs compared to the significant increase of 315,000 in March. This figure fell well below the predicted gain of 233,000, supporting Hollenhorst's concerns about the labor market's weakness. Surveys of both consumers and businesses also pointed to growing difficulty in finding jobs, as well as reduced hiring enthusiasm and increased job insecurity among employees.

Although recent economic data has presented mixed signals, with the first-quarter GDP report showing slower growth than anticipated, Hollenhorst maintains his conviction that a soft landing is unlikely. He notes that factors such as a wider trade deficit and slower inventory restocking contributed to the subdued GDP growth, while consumer demand remained robust.

Financial markets are starting to align with Hollenhorst's outlook, moving away from the hope of a soft landing. The Citi economist emphasizes that the Federal Reserve will not wait for both inflation and the labor market to weaken before initiating rate cuts, as witnessing deterioration in either area will prompt action. He points out that historically, monetary policy cycles have often followed a pattern of prolonged higher rates, followed by a labor market decline, and warns that this scenario seems to be unfolding currently.

Hollenhorst's prediction of a hard landing has not wavered, even amidst previous strong jobs reports. In February, he had already issued warnings about an upcoming recession, expecting it to hit by the middle of this year. He highlights indicators of softness, such as declining hours worked and a decrease in the number of full-time jobs.

As the U.S. economy faces uncertainties, with inflationary pressures and signs of labor market weakness, Hollenhorst's concerns and his call for multiple rate cuts from the Federal Reserve have garnered attention. Whether his contrarian view comes to fruition or remains an outlier in the broader economic outlook remains to be seen.