Goldman: Hot And Cool

Goldman Sachs note that “the U.S. economy added a whopping 517K jobs in January, defying a string of catchy headlines about layoffs, but compensation costs have nevertheless continued to slide lower across a range of measures.”

• “In this context, perhaps the most notable aspect of the FOMC’s communication last week was the fact they removed all the references to what is driving inflation. Essentially, Chair Powell took a somewhat agnostic view and implied that the Fed would not push for tighter conditions if spot wage and inflation data continue to improve.”
• “At the same time, the ECB (and BoE) laid out policy plans that were not especially aggressive.”
• “Amidst what is still a broadly procyclical environment and hence a negative macro mix for the USD, we think the balance of news this week taken together should be moderately positivethough not as much as it might be if the Fed were more closely relying on the Phillips Curve to dictate policy, but the path ahead also does not look as divergent as the market has been pricing. Most importantly, the pickup in hiring suggests the U.S. is (still) hardly in recessionary territory, and there is also still a risk that the cycle needs to be extended.”