Goldman Sachs Economist: US Employment Growth Near Zero, Inflation Data Encouraging

Labor Market Weakness

• ⚠️ Employment growth is estimated to be fairly close to zero, with openings and hiring continuing to trend downwards.
• 📉 While initial jobless claims remain stable, WARN notices and layoff announcements are inching higher, raising concerns.
• 📊 The University of Michigan consumer sentiment numbers show a reading not seen outside of a recession, indicating worries about the consumer and macro environment.

GDP and Economic Indicators

• 📈 Current GDP figures appear strong, but are heavily distorted by front-loading effects and inventory changes.
• 💡 The labor market is considered a more reliable indicator of the economy's current state than GDP, especially without updated government data.

Technology's Impact on Jobs

• 🤖 While most current job market weakness is attributed to pandemic echoes, there's a growing consideration that technology, including AI, might be playing a role sooner than expected.
• ⚡ The Challenger layoff report for October, the worst in 20 years, tempts analysts to build in a more significant and potentially earlier impact from technology on labor.

Inflation Outlook

• 📊 Inflation numbers have generally been encouraging, with core PCE expected to be around 2.2-2.3% after accounting for tariff pass-through.
• 📈 An estimated 50 to 60 basis points of pass-through from tariffs has occurred, with potentially another 40 basis points expected, though this is a known factor.
• 📉 Distortions in measuring financial services inflation, partly due to using stock prices, also contribute to the overall inflation picture.

Federal Reserve Policy

• 🎯 Despite labor market concerns, the inflation data supports the view that the Fed will deliver a cut at the December meeting.
• ⚠️ Uncertainty was injected by Chair Powell's press conference, but the overall economic indicators suggest a rate cut is still on the table.