Goldman's Jan Hatzius Has One Word On The Economy: PAYBACK

jan hatzius

Goldman’s Jan Hatzius has a note out on Friday’s jobs report miss, and it’s simply titled: Payback.

After weather-related boosts in December, January, and February, the economy is now paying it back with mediocre numbers.

This is clearly seen in construction numbers.

Expect another bummer of a report next month.

We do think the warm weather has been an important driver of stronger payroll numbers over the past few months. As we have shown, all of the acceleration in nonfarm payrolls since the fall has occurred in the (normally) cold states, and our state-by-state panel analysis suggests that weather has boosted February’s level of payrolls by 100k or a bit more. This state-level model suggests that none of the inevitable payback for this boost should have occurred yet, since March was just as warm relative to the seasonal norm as February. That said, weather-sensitive sectors such as mining and building construction did show some weakness, so we would pencil in 10k-20k for weather “payback” in March.

In addition, the 37,000 drop in retail employment was partly related to one-off job reductions in the department store industry, and should probably not be included in an estimate of the underlying employment trend. Taken together, we believe that the underlying trend in payroll employment growth is around 175,000 as of the March report. At this point, we would expect the headline number for April to fall short of this figure, partly because the weather payback is likely to be substantially larger in April than in March and partly because the underlying trend may be decelerating slightly (as suggested, e.g., by the drop in temporary help services employment in March).

Hatzius expects no easing at the next Fed meeting on April 24-25 (although the Chairman has a press conference that day, so he’ll be able to do a lot through communication), and then a move to ease more at the June 19-20 meeting.

Stepping back, we’ve now had a pretty solid string of disappointing data.

The trend seems to be: Not recessionary, but not accelerating either. Year over year numbers still look really good. But whether we’re talking about houses, cars, or consumer credit, the upward glide path has stalled out a bit.

That’s really easy to see in this chart we posted yesterday, of the year-over-yer change in non-seasonally adjusted revolving consumer credit. Things are WAY better than they were a year ago, but not quite as hot as they were the month before.


Here’s a look at annualized monthly car sales. Again, March was much better than the year before, but things have ticked down a little.


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