Is the labor market at a turning point? Goldman Sachs economists insist that the Federal Reserve will cut interest rates twice this year
Goldman Sachs economist Jan Hatzius's team pointed out that the key driver of labor demand is economic activity, and GDP growth has slowed significantly. The Federal Reserve may cut interest rates once in September and once in December
Although non-farm payroll data has not shown a significant cooling down, Goldman Sachs believes that the US employment market has reached a turning point and is likely to weaken in the near future.
Economists at Goldman Sachs, including Jan Hatzius, pointed out in a report released on Monday that while the strength of labor demand is not yet clear, in contrast to healthy non-farm payroll data, initial and continuing jobless claims have been rising in recent weeks.
The bank believes that despite the Federal Reserve's conservative dot plot released last week, which revised down the number of expected rate cuts this year from three to just one, based on the latest economic and employment data, there is a high likelihood of two rate cuts this year (in September and December):
Ultimately, the key driver of labor demand is economic activity, and GDP growth has clearly slowed down.
Regarding inflation, Jan Hatzius believes that the first-quarter inflation rebound may be an "anomaly," and core CPI growth is expected to remain stable for the rest of the year, with housing and non-housing core services inflation gradually slowing down.
Furthermore, Jan Hatzius also believes that US economic growth may continue to slow down:
Real income growth has slowed, consumer confidence has declined again, and there are initial signs indicating that election-related uncertainties may drag down business investment in the coming months