(NewsNation) — The nation’s largest retail trade group expects sales to rise at a slower pace this year amid sticky inflation and a healthy but cooling job market.

The National Retail Federation said Wednesday that it expects U.S. retail sales to increase 2.5% to 3.5% this year, down slightly from the 3.6% annual sales growth in 2023. That range would put U.S. retail sales between $5.23 trillion and $5.28 trillion for the year.

Although it marks a slowdown from the growth seen during the pandemic, the 2024 projection is in line with the 10-year pre-pandemic average, NRF said. The forecast suggests NRF economists remain cautiously optimistic about the year ahead.

“The economy is primarily supported by consumers who have shown much greater resilience than expected, and it’s hard to be bearish on the consumer,” NRF Chief Economist Jack Kleinhenz said. “The question for 2024 ultimately is, will consumer spending maintain its resilience?”

The retail group expects rising home and stock prices to help stimulate consumer spending in 2024 but acknowledged that many Americans are feeling a pinch from tighter credit and higher prices.

Last month, inflation ticked up to a 3.2% annual pace — a sign that rising prices remain a major concern. NRF expects inflation to moderate to 2.2% on a year-over-year basis by December.

One of the big question marks is when the Federal Reserve will cut interest rates. On Wednesday, a committee of Federal Reserve officials voted to keep interest rates at a 22-year high.

Kleinhenz said his forecast assumed a mid-year reduction in the federal funds rate but said if that date moves out, it would be “very challenging.”

“That could have a negative impact considerably on decision-making by consumers,” Kleinhenz said.

From a retailer perspective, prices for services such as medical care, travel, entertainment and auto insurance are up, which is driving consumers to make a trade-off between buying goods and services, Kleinhenz noted.

NRF expects the labor market to cool in the year ahead, with about 100,000 fewer jobs on average per month compared with last year. That will push the unemployment rate up slightly to an average of 4% for the year, the organization projects.

The 2024 forecasts come after a puzzling year of consumer behavior. Spending remained strong even as Americans felt bad about the state of the economy.

Last month’s retail sales came in weaker than expected but the 0.6% gain still marked an improvement from January’s 1.1% decline. However, after adjusting for inflation, which ticked up 0.4% from January to February, retailers only barely recorded an increase.

Some major retailers are already bracing for a slowdown.

Last week, Dollar Tree, which owns Family Dollar, announced plans to close nearly 1,000 stores over the next several years. In February, Macy’s said it will shutter 150 stores by the end of 2026.

Still, NRF expects projects full-year GDP growth of around 2.3%, only slightly slower than the 2.5% seen in 2023.