by SlateStone Wealth chief market strategist Kenny Polcari reacts to a warmer-than-expected PCE inflation report that spurred a Wall Street sell-off on ‘Varney & Co.’
The chief executive of Goldman Sachs offered recent insights on the labor market and efforts to cool inflation in the US
During Friday’s episode of the “Exchanges at Goldman Sachs” podcast, CEO David Solomon noted that the U.S. currently has “very low unemployment” and that the job market “across the economy” was “very strong.” ” A “very tight” job market has made cooling inflation “very difficult,” he said.
David Solomon, Chairman and CEO of Goldman Sachs, speaks at the 2022 Milken Institute Global Conference, in Beverly Hills, Calif., May 2, 2022. (Reuters/Mike Blake/File Photo/Reuters Photos)
The Labor Department said the US unemployment rate came in at 3.4% in January. In the same month, total nonfarm payroll employment also increased by 517,000 jobs, as FOX Business previously reported.
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“And so, one of the things that I think is interesting, it’s one of the reasons that I think inflation is going to be stickier, it’s one of the reasons that I think that the higher terminal rate, I think it’s going to be harder for the Fed, and they’re going to have to act more aggressively, to cool the economy,” Solomon said.
David Solomon, chief executive officer of Goldman Sachs Group Inc., during Bloomberg Television at the Goldman Sachs Financial Services Conference in New York, USA, Tuesday, December 6, 2022. Solomon sees “bumpy times ahead” for the global economy, m (Michael Nagle/Bloomberg via Getty Images/Getty Images)
“If you’re playing a nine-inning baseball game, I’m not going to tell you, you know, exactly where we are in that game,” he continued. “But we’re somewhere, in my opinion, in the middle of the game. It’s not close to the end of the game. And whether we’re in the third inning or the sixth inning, it’s going to depend.”
In January, inflation rose 0.5% month-on-month and 6.4% year-on-year, according to the latest Consumer Price Index data.
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The Federal Reserve has implemented multiple interest rate hikes as part of its ongoing efforts to bring inflation closer to the 2% target. These included a quarter-point increase at the start of the month and, before that, other larger increases.
“I think when I think about rates, the trajectory of rates, higher/longer,” Solomon said earlier in the podcast.
Solomon said that the market “thinks that the terminal rate is just above 5%” but he offered a prediction that it was “going to be much higher than that.”
David Solomon, chief executive officer of Goldman Sachs & Co., speaking during the Bloomberg New Economy Forum in Singapore, Wednesday, November 17, 2021. The New Economy Forum is organized by Bloomberg Media Group, a division of Bloomberg (Bryan van der Beek/Bloomberg via Getty Images/Getty Images)
He also said at one point that he believed a shallow recession or soft landing was more likely. The United States, Solomon noted, is “still in a period of uncertainty.”
Goldman Sachs has projected “about 1.3% economic growth” for the year, according to the CEO.
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Earlier in the month, while taking part in the Credit Suisse Financial Services Forum, Solomon made similar comments about inflation being “sticky” and the possibility of the US economy going soft.
Megan Henney contributed to this report.
