{"id":212584,"date":"2025-09-09T10:34:08","date_gmt":"2025-09-09T10:34:08","guid":{"rendered":"https:\/\/www.europesays.com\/us\/212584\/"},"modified":"2025-09-09T10:34:08","modified_gmt":"2025-09-09T10:34:08","slug":"goldman-sachs-jeremy-siegel-on-powells-rate-cuts-amid-shaky-labor-data","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/212584\/","title":{"rendered":"Goldman Sachs, Jeremy Siegel on Powell’s rate cuts amid shaky labor data"},"content":{"rendered":"

Recent jobs data did not paint the stable picture of the labor market that the Federal Open Market Committee (FOMC)<\/a> might have been hoping for. The story will likely be the same for inflation data released later this week. <\/p>\n

While conflicting pressures on both sides of the Fed\u2019s dual mandate will make a base rate decision more complex for chairman Jerome Powell and his colleagues, markets are taking it as a win: The Fed may, at last, be forced to cut the base interest rate.<\/p>\n

This is what many on Wall Street\u2014and in Washington\u2014want to see. Many argue that the Fed\u2019s current stance, with rates at 4.25 to 4.5 at present, is too restrictive. Markets want to see economic activity fostered by lower borrowing costs. <\/p>\n

As Professor Jeremy Siegel, of the Wharton School at the University of Pennsylvania wrote<\/a> for WisdomTree yesterday: \u201cThe market got exactly what it needed last week: confirmation that the economy is slowing\u2014not collapsing\u2014and that the Federal Reserve has the green light to start cutting rates.\u201d <\/p>\n

Siegel, who is senior economist at WisdomTree, said he expects a 0.25bps cut to the base rate at the FOMC\u2019s September meeting and two further one-click cuts for the remaining two meetings in 2025. <\/p>\n

\u201cEven an upside surprise in next week\u2019s PPI or CPI\u2014running near a 3% year-over-year pace\u2014should not derail that path, because the policy debate has shifted decisively toward labor-market weakness rather than transient price noise,\u201d Siegel added. <\/p>\n

Markets are looking marginally up before the bell this morning: S&P 500 futures are up 0.11% premarket. The index closed up 0.21% yesterday, the Nasdaq<\/a> was up 0.45% and the Dow<\/a> Jones up 0.25%.<\/p>\n

In Europe\u2014even as France works its way through a leadership change\u2014markets were fairly flat with London\u2019s FTSE 100 up 0.18% and Paris\u2019s CAC 40 up 0.2%. Only Germany\u2019s DAX was down, by a slight 0.39%. <\/p>\n

Over in Asia the HSI posted a 1.19% bounce with India\u2019s Nifty 50 also up approximately 0.4%. Conversely, Tokyo\u2019s Nikkei 225 was down 0.42% and Shanghai\u2019s stock exchange was down 0.51%. <\/p>\n

\u201cI advocate the Fed brings the policy rate below 3% over time; the economy simply doesn\u2019t require restrictive real rates with money growth subdued and inflation trending in the low 2-3% band,\u201d Siegel added. \u201cAs cuts progress, the yield curve should normalize from its inverted state, and that shift historically supports equity multiples\u2014particularly for rate-sensitive segments.\u201d <\/p>\n

Bond markets are minded to agree, if the data is anything to go by. Yields on U.S. 10-year Treasuries<\/a> are now dipping back toward 4%, with the CME Group\u2019s FedWatch barometer<\/a> now pricing in more than an 88% chance of a cut. Indeed, some 12% of analysts expect a 50bps cut.<\/p>\n

Further softening<\/p>\n

The market is buoyed by the prospect of cuts even despite some shaky data\u2014but Goldman Sachs Jan Hatzius believes there could be more to come. <\/p>\n

\u201cWe are penciling in an upward revision to the August payroll estimate next month, as seen in 12 of the past 15 September reports,\u201d Hatzius wrote in a note yesterday seen by Fortune. \u201cHowever, our\u00a0below-potential 2025 GDP growth estimate of 1.3% on a Q4\/Q4 basis suggests that underlying job growth is likely to remain below our 80k estimate of the \u201cbreakeven\u201d rate needed to keep the unemployment rate stable, at least in the near term.\u201d <\/p>\n

The margins of this \u201cbreakeven\u201d rate are narrowing as the months tick on. Thus far, economists told Fortune<\/a>, a shift in slower hiring has resulted in an equilibrium on account of higher immigration numbers and retirements. As such, the economy hasn\u2019t tipped into unemployment. The margin for error is small though, with the payroll report for August initially adding a little over 20,000 roles. <\/p>\n

But despite this tightrope, Goldman\u2019s chief economist sees green shoots ahead: \u201cBarring an outright jobs contraction in the next several months, our baseline forecast is that the economy gradually reaccelerates toward potential in 2026 as the drag from higher tariffs abates, fiscal policy turns more expansionary, and financial conditions remain easy amidst monetary easing.\u201d<\/p>\n

Here\u2019s a snapshot of the markets globally this morning:<\/strong><\/p>\n