The US economy is headed for a hard landing this year, and deep rate cuts are the only solution, Citi chief economist says

• The US economy is headed for an economic hard landing driven by a deteriorating labor market, Citigroup's chief US economist told CNBC.
• "Gradual softening has already started. That tends to snowball," Andrew Hollenhorst said about the job market.
• He's calling for four interest-rate cuts this year at a time when other forecasters are being more conservative.

A deteriorating labor market will be what causes the US economy to quickly turn sour, according to Andrew Hollenhorst, Citigroup's chief US economist. In fact, he sees an abrupt economic comeuppance later this year.

"Firms are hiring at a lower rate, firms are having workers work less hours," he told CNBC on Tuesday. "So this gradual softening has already started. That tends to snowball and end up in something that looks more like a hard landing."

While recent labor-market data doesn't necessarily point to such a dire situation, Hollenhorst says certain reports reveal a more pessimistic environment than many realize. Any notion of a hard landing is a troublesome prospect, since a full-fledged recession can follow.

"Small businesses are telling us that their hiring intentions are at the lowest levels that we've seen since 2016," he said, citing survey data from the National Federation of Independent Business. "And if I look overall at the economy, the hiring rate right now is at the lowest rate that it's been at since 2014. So we're at the lowest hiring rate in a decade."

And although NFIB data has fueled bearish sentiment for a while, Hollenhorst added that it's recently seen a sharp drop compared to the past months, making it worth paying attention to.

Even when taking on a holistic perspective, there's reasons to worry. For instance, he noted that while the national unemployment rate remains contained at 3.9%, that's a big shift from its previous low of 3.5%.

If unemployment ticks up above 4%, it could trigger the Federal Reserve to start lowering interest rates as soon as July, Hollenhorst predicted. Overall, he thinks four cuts will come before the end of 2024.

Other analysts have also voiced hard-landing calls similiarly pegged to labor-market deterioration. In fact, veteran forecaster Danielle DiMartino Booth says a recession has already arrived when looking at one unemployment indicator.

Meanwhile, weaker economic activity data and an impending hard landing also support prospects of a July cut, Hollenhorst said. That's because the Fed's higher-for-longer interest rate policy is grinding down on corporate earnings, he said, at a time when consumer savings have run through.