Goldman Sachs’s Jan Hatzius reacts to September jobs report

AND UNDERSTATE COSTS BY MORE THAN $1 BILLION OVER A DECADE. THE TEAM HAS DENIED WRONGDOING. CARL. >> THANK YOU SO MUCH, STEVENS. SEPTEMBER JOBS COMES IN WEAKER THAN EXPECTED THIS MONTH, WITH THE UNEMPLOYMENT RATE ALSO TAKING HIGHER TO 4.2. THAT NEWS DID SEND YIELDS LOWER TODAY AND STOCKS HIGHER. LET'S BRING IN JAN HATZIUS THIS MORNING AT POST NINE. GOLDMAN'S CHIEF ECONOMIST GET HIS FIRST TAKE ON THIS REPORT AND SORT OF THE WEEK THAT WE'VE HAD. JOHN GOOD TO HAVE YOU BACK. >> IT'S GOOD TO BE HERE. >> SO WE HAD WE HAD CORE PCE AND WE HAD WILLIAMS JEFFERSON BOWMAN AND NOW THIS SOME OF THIS STUFF'S KIND OF GOING YOUR WAY IN TERMS OF YOUR HOUSE VIEW. YES. >> IN THE SENSE THAT WE DON'T. >> NEED A LOT OF HIKES FROM HERE. YES. AND WE DID PUSH BACK THE NEXT MOVE AND FINAL MOVE IN OUR FORECAST FROM THE FED FROM OCTOBER TO DECEMBER. ON THE HEELS OF THE PCE NUMBERS. BUT ALL THE EVENTS THAT YOU SPOKE ABOUT, THE WILLIAMS SPEECH, THE JEFFERSON SPEECH AND TODAY'S EMPLOYMENT NUMBERS, I THINK PUSH IN THAT SAME DIRECTION THAT IT'S NOT WE DON'T NEED A LOT OF MONETARY TIGHTENING HERE. AND I THINK MARKETS ARE DISCOUNTING STILL THREE HIKES. AND I WOULD SAY THAT'S NOT NECESSARY. >> WHY WOULD WE NEED ONE IN DECEMBER. >> THEN I THINK DECEMBER THEY'VE SIGNALED ONE. CLEARLY IT WAS A REASONABLY CLEAR BASELINE. SO I THINK THAT IS WHAT THEY EXPECT TO DO. AND IF WE GET NO MAJOR NEWS IT STILL WOULD BE MY BEST GUESS. BUT IT'S CERTAINLY VERY POSSIBLE THAT IF WE CONTINUE TO SEE FRIENDLIER NEWS THAT THEY DECIDE, YOU CAN FOREGO THAT. AND THEN IT WOULD BE A ONE AND DONE HIKE. I DON'T THINK THAT'S WHAT THEY INTENDED TO DELIVER, BUT IT ALL DEPENDS ON THE DATA, OF COURSE. >> RIGHT. I MEAN, ONE AND DONES ARE NOT COMMON, BUT THEY'RE NOT UNPRECEDENTED. >> THAT'S RIGHT. IT'S POSSIBLE, BUT IT'S USUALLY NOT WHAT A CENTRAL BANK SETS OUT TO DO BECAUSE 25 BASIS POINTS IS JUST A VERY SMALL NUMBER. WHY WOULD YOU GO THROUGH THE TROUBLE OF SIGNALING IT AND WORKING UP TO IT AND THEN DELIVERING IT? BUT IT'S ALWAYS GOING TO BE DATA DEPENDENT. >> WHAT WOULD BE CONSIDERED FRIENDLY OR NEWS. >> ONGOING SOFT INFLATION NUMBERS IN PARTICULAR. SO THERE'S ONE CPI BETWEEN NOW AND THE OCTOBER MEETING. THAT'S GOING TO BE A REALLY KEY DATA RELEASE, PROBABLY MORE IMPORTANT THAN THE EMPLOYMENT NUMBERS. AND YOU KNOW WE THINK IT'S GOING TO LOOK REASONABLY FRIENDLY SORT OF 0.2% MAYBE A LITTLE BIT ABOVE THAT WOULD CERTAINLY BE CONSISTENT WITH NOT GOING IN OCTOBER. BUT IF YOU CONTINUE TO SEE 0.22 TYPE OF NUMBERS, MAYBE DECEMBER DOES NOT RESULT IN A HIKE. >> IT SEEMS PART OF THE MARKETS OVER ANTICIPATION OF FURTHER RATE HIKES BEYOND WHAT YOU'RE LOOKING FOR, WAS SOMEWHAT RELATED TO THIS SORT OF MOMENTUM IN THE STORYLINE ABOUT NEUTRAL RATE MAY BE AS HIGHER, MAYBE MORE SIGNALED THAT 4% TO FOUR AND A QUARTER, WHICH WOULD BE ONE MORE HIKE. MAYBE THAT'S CLOSER TO WHAT THEY THINK OF AS NEUTRAL, BUT ALSO THAT FINANCIAL CONDITIONS SOMEHOW NEED TO TIGHTEN FURTHER. I WAS TAKEN BY THE FINANCIAL CONDITIONS INDEXES THAT YOU GUYS MAINTAIN, AND WHEN YOU ELIMINATE EQUITIES FROM IT, IT ACTUALLY WAS BACK TOWARD LIKE EARLY 2025 TIGHT LEVELS. >> THAT'S RIGHT. IF YOU ELIMINATE THE MAJOR DRIVER OF EASING, WHICH HAS BEEN EQUITIES BECAUSE WE'VE SEEN SUCH A STRONG PERFORMANCE, THEN YOU DO SEE SIGNIFICANT TIGHTENING BECAUSE IN PARTICULAR LONG TERM INTEREST RATES HAVE HAVE RISEN QUITE SIGNIFICANTLY AT THIS POINT. IF YOU LOOK AT THE WHOLE THING, AND I THINK YOU SHOULD PROBABLY INCLUDE EQUITIES, ALTHOUGH THE WEIGHT IS ALWAYS GOING TO BE A SUBJECT OF DEBATE, I WOULD SAY IT'S FINANCIAL CONDITIONS ARE MAYBE A VERY SMALL HEADWIND TO GROWTH AT THESE LEVELS. BUT AT THIS POINT, IT'S STILL NOT NOT REALLY MAJOR TO ME. IF I LOOK AT THE GROWTH PACE OF THE ECONOMY, WE SEEM TO BE GROWING AT BASICALLY A TREND RATE. THE LABOR MARKET LOOKS STABLE. YOU CAN FIND SOME INDICATORS LIKE THE U6 RATE, FOR EXAMPLE, THAT HAVE SHOWN, YOU KNOW, TIGHTENING LABOR MARKET AND IMPROVING LABOR MARKET OR CONTINUING CLAIMS. YOU CAN LOOK