Tags: Goldman | Sachs | US | Jobs

Goldman Sachs: US Jobs Report to Fall Far Short of Estimates

Monday, 30 Apr 2012 09:57 AM

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The United States likely added only 125,000 net jobs in April, a Goldman Sachs report finds, far less than calls from Reuters for a gain of 170,000, and an average of 177,250 jobs created every month from December to March.

The Bureau of Labor Statistics will release the official number Friday, about a month after the March jobs report came in well below expectations with 120,000 jobs added.

"Real income growth remains soft, partly because of higher energy prices, wealth effects are not yet particularly positive, consumer confidence remains modest, and again some of the recent strength in retail sales probably reflects weather effects," says Goldman Sachs chief U.S. economist Jan Hatzius, according to CNBC.

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The U.S. economy grew 2.2 percent in the first quarter, below expectations for a 2.5 percent gain, which further illustrates the U.S. economy remains tepid.

Sluggish growth may prompt the Federal Reserve to extends its policy of reshuffling its Treasury portfolio by selling short-term securities and stocking up on longer-dated Treasurys, a policy dubbed Operation Twist by the markets.

The Federal Reserve has not signaled a willingness to undertake more drastic stimulus measures such as purchasing bonds directly from banks, a policy known as quantitative easing.

Still, tame inflation rates coupled with sluggish growth may prompt the Fed to extend Operation Twist.
Markets would applaud it.

"The case for a successor program to Operation Twist still looks solid to us, and the FOMC’s (Federal Open Market Committee) apparent reluctance to deliver it is a concern," Hatzius adds.

Some say the Federal Reserve should not intervene, especially when it comes to quantitative easing.

Since the downturn, the Federal Reserve has injected $2.3 trillion into the economy via two rounds of quantitative easing with the aim of steering the economy away from deflationary decline and towards increased investment and hiring.

Critics say all that liquidity will fuel inflation soon.

"I think the Fed is making huge mistakes in what they are doing with the amount of money printing that they are doing. It's one of those things that is not going to show up right away but when it does it's a massive problem," says Robert Wiedemer, financial commentator and best-selling author of "Aftershock."

The Fed has set an inflation target of 2 percent and insists consumer prices will rise close to that figure this year, with which Wiedemer agrees.

"Where we start to differ is when we go out over the longer term. I think we are going to see much higher inflation over the next two to four years," Wiedemer told Newsmax.TV in an exclusive interview.

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