Goldman Sachs Warns: Job Market Weakest in 50 Years, GDP Overestimated
Goldman Sachs’ chief economist Jan Hatzius has expressed concerns regarding the accuracy of the United States’ GDP growth estimates. Current projections suggest a growth of 3.8% for the second quarter and 3.3% for the third quarter of 2023. However, Hatzius believes these figures may be overly optimistic due to absent data from the recent government shutdown.
Job Market Weakness: A Major Concern
Recent labor market indicators point towards stagnation and even potential contraction. Hatzius highlighted the downward trend in employment surveys, notably in manufacturing and service sectors, which have fallen below the key index midpoint of 50. This decline is consistent with job market stagnation.
Goldman Sachs’ labor market tracker has reverted to levels not seen since 2016. It considers multiple factors, including the unemployment rate and job openings, indicating a tightening labor market situation.
Negative Outlook for Employment
The outlook from household surveys is grim. The anticipated change in the unemployment rate over the following year has reached lows not seen since the late 1970s. Hatzius argues that job market indicators offer more reliable insights regarding current growth than preliminary GDP estimates. Therefore, the job market’s deterioration seems to contradict the GDP growth forecasts.
Overestimated Growth Figures
The GDP growth projections may also suffer from distortions due to business behaviors earlier in the year. Hatzius attributes this to the frontloading of durable goods purchases, heavy inventory volatility, and net trade adjustments, fueled by concerns over tariffs initiated by the Trump administration.
Particularly in March, there was a notable surge in U.S. import volumes from key trading partners like the euro area and Taiwan. These buying behaviors may not accurately reflect underlying economic health.
Impact of AI on Young Workers
An additional concern raised by Hatzius involves the job prospects for younger individuals. Fed Chairman Jerome Powell previously noted that entering the labor market has become increasingly challenging for young job seekers, especially for those lacking technical skills. Hatzius agrees, indicating that artificial intelligence’s emergence seems to reduce opportunities for younger workers, particularly in tech-oriented roles.
While the overall growth indicators seem positive, the underlying labor market trends suggest a more complex economic landscape. Without a strong correlation between growth and AI, opportunities may dwindle further for routine cognitive jobs in the future.
Conclusion
In conclusion, Goldman Sachs warns that the current GDP estimates of 3.8% and 3.3% may misrepresent actual economic conditions. A combination of precarious labor market trends and significant changes in business behavior may indicate a bleaker economic outlook on the horizon.
