Goldman Economist Hatzius Sees Benign July CPI, Slashes Jobs Trend to 5,000
1h ago|5 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
federal-reserveinflation
Fazen Markets Editorial Desk
Collective editorial team · methodology
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Goldman Sachs chief economist Jan Hatzius expects a benign US Consumer Price Index report for July, forecasting a headline reading around 0.05% month-on-month and a core increase near 0.19%, according to an interview with Fox Business. Both figures align with or slightly undercut consensus expectations, reinforcing what Hatzius identified as a softer inflation trend that began in June. The interview, reported by investinglive.com, also revealed a sharp downward revision in Goldman's estimate of the underlying monthly payrolls trend to around 5,000 from approximately 75,000, underscoring a rapidly deteriorating labor market beneath volatile headline data. The forecast, if realized, would ease pressure on the Federal Reserve ahead of its September policy meeting.
Inflation data has become the primary driver of Federal Reserve policy and market volatility for the past five years. The last time the US saw a sustained period of sub-2% annual inflation was the two decades preceding the pandemic, when core PCE averaged between 1.6% and 1.7%. The current backdrop is defined by core PCE inflation running at 3.3% year-on-year, still well above the Fed's target.
The catalyst for Hatzius's specific commentary is the imminent release of July's CPI data, a key input for the Fed's September rate decision. His forecast hinges on the fading influence of several temporary factors he blames for worse-than-expected inflation in the first five months of 2026. These include tariff pass-through effects, higher oil prices, and a World Cup-related impact.
Hatzius argues the month-to-month tariff impact is largely over, though it still adds about 0.7 percentage points to the annual core PCE rate. He expects this contribution to trend toward zero over the next six to twelve months. This projected decline in persistent inflationary pressures forms the basis for his view that no further rate hikes are necessary this year.
Goldman Sachs's forecast provides specific numbers for the upcoming CPI release and a stark revision of labor market health.
| Metric | Goldman Forecast | Previous Goldman Trend/Estimate |
|---|---|---|
| July CPI Headline (MoM) | ~0.05% | N/A |
| July CPI Core (MoM) | ~0.19% | N/A |
| Underlying Monthly Payrolls Trend | ~5,000 | ~75,000 |
The 0.05% headline forecast is minimal, and the 0.19% core projection is below the 0.2% threshold often watched by markets for signs of reacceleration. The revision to the underlying payrolls trend, from 75,000 to 5,000, represents a 93% cut and is derived from a three-month average of payrolls data and a nine-month average of the noisier household survey.
In the broader financial markets as of 01:34 UTC today, speculative assets show mixed signals. The NEAR token trades at $1.65, having gained 2.78% in the last 24 hours, with a market capitalization of $2.15 billion and 24-hour volume of $154.04 million. This activity stands in contrast to the cautious macro outlook presented by Hatzius. The core PCE inflation rate, the Fed's preferred gauge, remains at 3.3% year-on-year, significantly above the 2% target.
The immediate market implication of a soft CPI print, in line with Hatzius's forecast, would be a reduction in perceived hawkish Fed risk, potentially supporting equity valuations, particularly in rate-sensitive sectors like technology and real estate. Treasury yields, especially on the short end of the curve, would likely see downward pressure. The more consequential data point is the jobs trend revision, which suggests the labor market's resilience—a key pillar of the Fed's higher-for-longer stance—is cracking faster than headline monthly changes indicate.
A counter-argument exists that Hatzius may be underestimating persistent inflationary pressures in services or that the labor market slowdown could prove transitory. Fed Chair Kevin Warsh's openness to potentially shifting the central bank's preferred inflation gauge from core PCE introduces a layer of policy uncertainty that markets must now price, a move former New York Fed president Bill Dudley has criticized as a credibility risk.
Positioning flows are likely to rotate towards duration and growth assets if the disinflation narrative gains strength. Short positions in Treasury futures may be covered, while flows into broad equity indices like the SPX could accelerate. Specific tickers that benefit from lower discount rates, such as long-duration tech stocks, would be primary beneficiaries of this shift.
Market attention is fixed on two immediate catalysts: the July CPI report release and the Federal Open Market Committee meeting on September 17-18. The actual CPI numbers, versus Hatzius's forecast, will set the tone for trading into the Fed's blackout period preceding the September meeting.
Key levels to watch include the 10-year Treasury yield around 4.0%, a psychological and technical level, and the S&P 500's ability to hold above its 50-day moving average. For the NEAR token, support at the $1.50 level and resistance near its 24-hour high will be tested against the broader macro sentiment.
Subsequent labor market reports, including the August jobs data due in early September, will be scrutinized for confirmation of the weakened 5,000-per-month underlying trend. Any sustained breach of this trend would force a fundamental reassessment of US economic strength and the Fed's reaction function.
A monthly CPI increase of 0.05%, if annualized, translates to a pace well below 1%, signaling dramatically cooling inflation. For investors, this environment typically reduces the pressure on the Federal Reserve to raise interest rates, which is positive for bond prices and growth-oriented stocks like those in the technology sector. However, the simultaneous sharp downgrade in the jobs trend suggests economic momentum is fading, which could eventually weigh on corporate earnings forecasts and limit equity upside.
Goldman's revised estimate of a 5,000 underlying monthly job gain is exceptionally weak by historical standards. In the decade preceding the pandemic, average monthly job growth often exceeded 200,000. A trend this low is consistent with an economy at stall speed and suggests the labor market is deteriorating rapidly beneath the surface volatility of the monthly headline prints. It indicates businesses are adding virtually no net new positions on a sustained basis.
Fed Chair Kevin Warsh recently suggested the central bank might move away from core Personal Consumption Expenditures (PCE) as its primary inflation metric, though he did not confirm a firm switch. Critics like former New York Fed president Bill Dudley argue changing the target metric mid-fight risks damaging the Fed's credibility, as it could be perceived as moving the goalposts. Hatzius expects PCE to remain the focus, but the debate itself injects uncertainty into how markets will interpret future inflation data.
Goldman Sachs sees inflation cooling and the labor market weakening sharply, a combination that argues against further Federal Reserve rate hikes.
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