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Goldman Sachs’ Jan Hatzius warned that U.S. GDP estimates showing 3.8% growth in Q2 and 3.3% in Q3 may be overstated, due to missing data from the government shutdown and weakening labor trends. He pointed to falling employment indicators and survey data signaling stagnation, arguing job market weakness offers a more accurate gauge of current growth. Hatzius also cited temporary boosts from tariff-driven stockpiling earlier this year and warned that younger workers face growing hiring challenges, particularly as AI adoption reshapes labor demand.
GDP estimates which show steady growth in the American economy may prove to be overly optimistic, Goldman Sachs warned, as a vacuum of data during the government shutdown may result in employment figures ultimately dragging down the optimistic outlook.
In a note seen by Fortune, Goldman’s chief U.S. economist Jan Hatzius highlighted that GDP estimates have moved up sharply during the government shutdown, with Q2 tracking at 3.8% and Q3 at 3.3%. By some estimations, that figure is even higher: The Federal Reserve Bank of Atlanta, for example, wrote in an October 17 update that Q3 GDP may track as high as 3.9%.
Despite the stock market rallying steadily, the Fed is expected to cut rates at least once more before the end of the year. And with the growth trajectory looking positive, Wall Street has every reason to celebrate—right?
Not quite, according to Hatzius. He warns that employment may prove to be the thorn in the side of the rosy outlook, coupled with changing business behavior in reaction to shifting policy from the White House.
On the employment side, Hatzius noted the labor outlook in surveys, such as manufacturing and service growth, had fallen “well below [the index midpoint of] 50, consistent with employment stagnation or even contraction.” As a result, Goldman’s labor market tightness tracker (which averages out data including the estimated unemployment rate, estimated job openings, the Conference Board’s labor market differential, and the NY Fed’s job findings expectations, to name a few), has eased to 2016 levels and is continuing to trend downwards.
Hatzius notes: “Household surveys are already very negative. For example, the expected change in the unemployment rate over the next year has never been this bad outside recessionary periods since the University of Michigan started asking the question in 1978.”
As such, “since job market indicators often provide more reliable information about current growth than the preliminary GDP estimates, this weakness adds to our conviction that Q2/Q3 GDP sends too positive a signal” Hatzius adds.
