by Calculated Risk on 4/09/2018 09:31:00 AM

A few brief excerpts from a note by Goldman Sachs chief economist Jan Hatzius: Less Pleasant

The 103k jobs gain in March was well below expectations. Part of the miss reflects a greater-than-expected payback for prior strength in weather-sensitive sectors such as construction and retail. But other industries were also soft, prior months were revised down on net ... While growth is looking softer, it remains far from soft. ...

We view the widening of the LIBOR/OIS spread as a technical and mostly temporary consequence of the international provisions in the new tax law, rather than a sign of banking stress. ... Even if the LIBOR move is technical, one might worry about its direct impact on private-sector borrowing costs and hence aggregate demand. ...
...
Following President Trump’s threat of tariffs on another $100bn of imports from China, the risk of a broader trade confrontation has grown. ... it is harder to rule out continued escalation to a level that does ultimately have a first-order impact on the economy, either directly or (more likely) via tighter financial conditions.

In the end, we think the environment is becoming less pleasant but the baseline outlook for the economy and monetary policy hasn’t really changed much. Growth is a bit weaker, inflation is a bit higher, financial markets are definitely more volatile, and economic imbalances (especially in government finance) are starting to become more visible.