Goldman Sachs expects January U.S. payrolls to undershoot forecasts, citing model effects and subdued hiring signals despite limited layoff pressure.
Earlier:
- Preview: January non-farm payrolls by the numbers. The consensus is high
Summary:
Goldman sees January payrolls at +45k
Forecast below market consensus
Birth-death model a key downside risk
Layoff indicators relatively supportive
Labour market cooling gradually
U.S. job growth is expected to slow in January, with hiring likely to undershoot market expectations, according to a new research note from Goldman Sachs.
The bank estimates that nonfarm payrolls rose by around 45,000 in January, below the consensus forecast of roughly 70,000 and under the recent two-month average pace of just over 50,000. Private-sector payrolls are also seen increasing by about 45,000, compared with expectations closer to 75,000.
Goldman points to several factors that could weigh on the official employment tally. A key uncertainty is the Bureau of Labor Statistics’ birth-death model, which will be updated in the January report. The bank estimates this revision could subtract 30,000 to 50,000 jobs from headline payroll growth. In addition, a range of alternative or “big data” employment indicators tracked by Goldman suggest hiring momentum remained subdued, averaging gains of around 40,000 during the month.
Government hiring is also expected to provide little support, with public-sector payrolls forecast to be broadly unchanged. Meanwhile, measures of labour demand have softened. While some alternative indicators showed job openings holding up late last year, the Conference Board’s labour differential fell sharply in January to its lowest level since early 2021, signalling weaker perceptions of job availability.
That said, Goldman notes several offsetting forces that could limit downside risks. Layoff indicators improved modestly, with initial jobless claims declining in January and surveys showing fewer firms reporting employment reductions. Seasonal factors, which typically anticipate large early-year job losses, have also adjusted over time, reducing the scope for a negative seasonal drag.
The bank also expects rebounds in retail and construction employment, following weaker-than-usual holiday hiring and weather-related disruptions in December. In addition, the resolution of labour strikes is expected to add a small boost to January payrolls.
Overall, Goldman argues the balance of evidence points to moderate but softer job growth, reinforcing a narrative of gradual cooling rather than abrupt deterioration in U.S. labour market conditions.
This article was written by Eamonn Sheridan at investinglive.com.