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Goldman Sachs: Jobs number is an outlier

Stop panicking

The jobs report just came out with numbers far lower than anyone expected. Although economist originally predicted the nonfarm payroll employment to come in at 160,000, the number was actually quite lower: 38,000.

Some economists, including U.S. chief economist Paul Ashworth, said that 160,000 was too high given the Verizon workers strike, and said the number would be closer to 120,000, still much higher than it came in at.

Goldman Sachs response?

“This is an outlier because it’s not really consistent,” Goldman Sachs Chief Economist Jan Hatzius said.

Whereas payroll numbers did come in very weak, he said it is very probably that we look back in a couple months to see that this month was, in fact, an oulier.

“Just as importantly, however, a low number will not necessarily affect the chances of a Fed rate hike over the summer because the strike was only a temporary setback,” Ashworth stated.

That being said, when he made that statement Ashworth expected an “unusually low” number of 120,000, not 38,000.

Lindsey Piegza, Stifel Fixed Income chief economist agreed that the jobs report was disappointing, but made this comment:

“On the one hand, this morning’s report was a severe disappointment,” Piegza said. “However, on the other hand, the weakness is not entirely unexpected; it is clear employment gains have moderated more recently, a trend Fed officials were well aware of before lashing out with weeks’ worth of hawkish comments.”

Piegza pointed out: “One data point does not make a trend,” and said that the Fed is now left with two options.

“Either one, the U.S. economy is as relatively “moderate” as previously proposed by a plethora of Fed officials over the past month and the Committee is comfortable moving forward with a continued removal of accommodation near-term despite a lackluster May employment report," Piegza said, "or two the hawkish rhetoric of a more stable economy spoon fed to the marketplace leading up the June meeting was false or at least so unfounded that one data point could derail both Committee members’ more positive assessment of the current economy, as well as expectations for future growth, leaving policy makers cowering in the corner and further delaying a second rate hike.” 

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