“It’s not a recessionary data point, but it is a data point that is clearly showing the economy is growing at a below trend pace,” Hatzius said. “It’s certainly not enough to absorb people back into the workforce and over time it’s probably consistent with slight deterioration in the labor market.”
Hatzius is keeping an eye on other indicators for signs the slowdown is starting to bite harder. “If we were to see further deterioration in the business surveys, like the ISM and similar indicators, it would definitely be a warning sign,” he said.
There are also risks to economic growth forecasts for the second half of the year, particularly if the looming ‘fiscal cliff’ – when tax cuts expire and automatic spending cuts go into effect at the end of the year – is not resolved. Goldman sees 2 percent gross domestic productgrowth in the second half of 2012 and just 1.5 percent growth in early 2013.
A weaker economy could also push the Federal Reserve to adopt additional easing later in the year, Hatzius said.