Goldman Sachs Maintains Forecast for 2 Rate Cuts after Soft US Job Reports

Goldman Sachs wrote in a note stating that the firm continues to expect two rate cuts this year, in July and November, saying that the April employment report was soft but not weak.

According to the US investment bank, the US nonfarm payrolls recorded a growth of 175k in April, falling below consensus by 65k and marking a 6-month low. While the healthcare industry continued to observe robust job growth, the leisure and government sectors experienced a significant slowdown, hinting that rehiring in these areas may have reached its peak. The household survey showed a soft performance, with the unemployment rate climbing by 0.1 percentage point to 3.9%, driven by a 25k uptick in household employment. Additionally, the underemployment rate saw an increase.

Average hourly earnings saw a month-over-month rise of 0.20%, which was below expectations. Goldman Sachs’ analysis indicates that the underlying job growth pace currently stands at 189k based on payroll and household surveys. Factoring in full immigration numbers could potentially elevate this figure by an additional 20k. The estimated pace of average hourly earnings growth is at +3.5%.

Goldman Sachs’ Q1 wage tracker displays a quarterly annualized increase of +4.5% and a year-over-year rise of +4.3%.

Due to the release of these economic data, Goldman Sachs maintains its projection of two rate cuts for the year, anticipated to occur in July and November.


Meanwhile, the probability of rate cuts in September were about 70% as of Monday, based on CME’s FedWatch Tool.