Goldman Sachs: U.S. job market is at a turning point, reiterates expectation of two interest rate cuts by the Federal Reserve this year
Goldman Sachs economists say the US labor market is at a turning point, further weakness will affect employment. They are satisfied with their expectations for the Fed to cut interest rates twice this year. In addition, the economic slowdown may continue, with consumer confidence declining and increased election uncertainty likely to drag down business investment in the coming months
According to the Zhitong Finance and Economics APP, Goldman Sachs economists stated that the U.S. labor market is at a "turning point", and any further weakening in demand for workers will affect employment, not just job vacancies.
Economists, including Jan Hatzius, wrote in a report to clients that the strength of labor demand is still unclear. In contrast to healthy non-farm employment data, initial and continued claims for unemployment benefits have been rising in recent weeks.
Hatzius wrote, "Ultimately, the key driver of labor demand is economic activity, and GDP growth has clearly slowed." Therefore, despite the "unexpected hawkish" forecast made by the Federal Reserve last week, "we are satisfied with our forecast for rate cuts in September and December."
It is understood that Federal Reserve officials lowered their expectations for rate cuts this year to only one last week, instead of the previously anticipated three cuts. As recently as May, Goldman Sachs was betting that the Fed would start cutting rates in July.
Hatzius stated that the surge in first-quarter inflation may be an "anomalous phenomenon," and reports for the remainder of the year are expected to show stable core goods prices, with housing and non-housing core service inflation gradually slowing down.
Regarding the outlook for economic growth, the Goldman Sachs economist mentioned that the recent economic slowdown may continue.
In a report on June 17th, Hatzius wrote, "Real income growth has slowed, consumer confidence has declined again, and early signs of increased election-related uncertainty may weigh on business investment in the coming months."