Jan Hatzius on August Jobs Report: Softening Labor Market, September Rate Cut Likely

August Jobs Report Analysis

• 📉 The economy added 22,000 jobs in August, significantly below estimates, indicating a softening labor market.
• 📈 The unemployment rate ticked higher to 4.3%, as expected.
• ⚠️ Hiring is described as very slow, though layoffs remain low.

Federal Reserve Rate Cut Implications

• ✂️ The weaker jobs report solidifies the case for a September interest rate cut by the Federal Reserve.
• 📉 Additional cuts in October and December are also considered likely, dependent on future data.
• 💡 Moving closer to a neutral interest rate is expected to support the job market.

Economic Outlook and Recession Odds

• 📊 Goldman Sachs forecasts US GDP growth in the mid-to-high 1% range for the remainder of the year, with a gradual acceleration towards trend growth (around 2.25%) in 2026.
• ⚠️ Recession odds are estimated at 30%, a figure that has been stable but has edged down recently.
• 📌 The economy is currently growing despite slowing job growth, with GDP expansion continuing.

Tariffs and Consumer Impact

• 💰 Hatzius stands by the analysis that consumers will ultimately bear two-thirds of the cost of tariffs over time, as firms recoup additional expenses.
• 🧐 While the immediate consumer impact has been lower than projected, the long-term expectation remains that costs will be passed on.
• ✅ The analysis will be updated as new data becomes available.

Economic Forecasting Accuracy

• 🏆 Goldman Sachs, led by Hatzius, won the Lawrence Klene Award for economic forecast accuracy for an unprecedented third time, highlighting team effort.
• 📈 There's a possibility of upward revisions to August numbers, as August reports historically tend to surprise on the downside.