The retail sales report for January, which saw higher than expected declines, raised alarms about weakening in consumer resilience. Charles Schwab Chief Global Investment Strategist Jeffrey Kleintop joins Yahoo Finance Live to discuss why he doesn't believe this an "outright recession."
Kleintop says consumers are "piling onto credit cards" to maintain spending habits amid high inflation. He notes debt burdens are rising even as the labor market shows some weakening. With the recent wave of lay-offs, Kleintop belives "maybe [consumers] don't borrow as much", making it harder to sustain spending.
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Editor's note: This article was written by Angel Smith
Video Transcript
AKIKO FUJITA: Jeffrey, you could argue that underlying the strength-- the relative strength in the US economy has been the consumer. How big of a concern is this data set that came through today? Yes, it's just one month, but it seems to show there's a bit of a crack that's starting to form.
JEFFREY KLEINTOP: --possible. I guess I'd also point out that most US consumers are now piling on to their credit cards in order to support that spending. They've eclipsed their income gains and now they're digging into more and more debt. So that's a concern. It limits the-- maybe extent of that resilience.
And I do worry a little bit about a weakening job market later this year as we've heard from many business leaders talking about additional headcount reductions. Usually that takes six to nine months to actually flow through. So we can start to see some weakness there.
In addition to those service industries that are now slowing down in the US, we could see some layoffs there. There are 10 times as many jobs and services as manufacturing in the US so that's where we can see that slowdown. And if people feel their jobs are more at risk, maybe they don't borrow as much to sustain that spending.
So I do think there's a bit of a slower momentum there for the consumer in the US, though, maybe not an outright recession.
