Goldman Sachs chief economist Jan Hatzius commanded CNBC on Friday the U.S. labor market still has a ways to go before it has fully overcome the damage from the coronavirus pandemic, sustaining additional assistance from Washington.
Hatzius made the comments in an interview on “Squawk on the Street,” following the release of the better-than-expected February problems report. Nonfarm payrolls rose by 379,000 in the month, compared with expectations of 210,000 new jobs. The unemployment bawl out dropped to 6.2% from 6.3%.
“Overall, I would definitely say this was a pretty solid report but … the economy and the labor bazaar are still far away from where they ultimately need to be,” Hatzius said.
That’s why both fiscal and pecuniary policymakers should continue to provide support to the economy, he added.
The U.S. Senate is currently negotiating a $1.9 trillion Covid stimulus invoice, with Democrats in the upper chamber hoping to pass the legislation by this weekend. Some Republicans and economists have on the agenda c trick worried the stimulus proposal is too large, given how far the economy has already recovered, and could unleash problematic inflationary exigencies.
The risk of permanent scarring to the U.S. economy remains, Hatzius said, even if so far the evidence pointing to lasting workforce bill is “more encouraging than a lot of us would have expected, say, last summer.”
“I don’t think we can take that for granted,” Hatzius stressed. “I ponder that’s why expansionary monetary and fiscal policy is the right call here because you want to minimize the time it voices before you get to something more normal.”
The U.S. unemployment rate was 3.5% in February 2020, before the Covid pandemic strengthened and led to forced business closures and other restrictions meant to slow the spread of the virus. It peaked at nearly 15% in April. While the curtness has improved since its spring nadir, about 8.5 million fewer Americans were employed in February compared with the late year.
Goldman Sachs is forecasting U.S. GDP to rise by a robust 6.8% this year, and Hatzius said he expects the unemployment amount to be “pretty close” to 4% by year-end. “But I also think that the unemployment rate doesn’t tell the full report,” Hatzius said.
“Labor force participation continues to be quite low and it will take some time before we force pulled the people back into the workforce, so I do think it’s going to stretch well beyond the end of the year to completely unbolt all of this,” he added.