Goldman's Jan Hatzius Believes the Hard Part Is Over

Employment Trends

Jan Hatzius from Goldman Sachs provides insights into the current employment trends, highlighting the importance of distinguishing between positive and negative softening in the labor market. He notes that while job openings have decreased, this is a positive development, as it indicates a move towards sustainable growth and wage stability. The labor market, although still strong, is less overheated and closer to pre-pandemic conditions 1. Hatzius emphasizes the significance of labor market indicators, such as initial claims and unemployment rates, as key recession predictors 2.

The decline in job openings that we've seen over the last year and a half or so, I think is very much a good thing because it puts us on a more sustainable footing.

--- Jan Hatzius

He suggests that a material deterioration in these indicators would be a cause for concern, potentially signaling a recession.

   

Labor Market Rebalancing

The concept of labor market rebalancing is crucial in understanding current economic conditions. Hatzius discusses the jobs-workers gap, which has decreased significantly, indicating a healthier balance between job openings and unemployed workers 1. He also addresses the Som rule and its implications for predicting recessions, noting that significant changes in unemployment rates have historically aligned with economic downturns 3. Despite these historical trends, Hatzius remains optimistic about the labor market's resilience.

Significant changes in the unemployment rate is certainly something I would pay attention to, but I wouldn't elevate it to the status of something that tells you you now have to switch to a recession forecast.

--- Jan Hatzius

He highlights that other labor market indicators, such as payroll growth and low initial jobless claims, continue to show strength, suggesting that the risk of recession is lower than previously anticipated.