Although the September jobs report was encouraging, job growth remains “lackluster” and is unlikely to change the Federal Reserve’sthinking on interest rates, Jan Hatzius, Goldman Sachs’ chief U.S. economist, told CNBC Friday.
The U.S. economy created a tepid 114,000 new jobs in September, with the unemployment rate dropping to 7.8 percent from 8.1 percent. It was the first time in 44 months that the unemployment rate was below 8 percent.
The big drop in the unemployment rate can be attributed to a strong household employment survey, Hatzius told CNBC’s “Squawk on the Street.”The household survey uncovered more than 800,000 new jobs during the month.
“It was a very strong household survey — some of that was government some of that was involuntary part-timers — nevertheless it was a good employment gain,” he said. “That basically gave you a big drop in the unemployment rate. Overall, I think it was pretty encouraging.”
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Revisions to the previous reports were also somewhat promising, but Hatzius said most of them came from the government, which “doesn’t tell you as much about business conditions.”
Nonetheless, the 114,000 increase in net new jobs is still fairly “lackluster," Hatzius said.
“To keep the unemploymentrate stable, the economy needs to create about 100,000 jobs, if the participation rate doesn’t change,” he noted.
That would still mean only a protracted jobs recover, however. “It’s another illustration of how disappointing this recovery is,” the economist said.
Hatzius also doesn’t expect September’s drop in the unemployment rate to change the Fed’s thinking on interest rates. He said that the Fed would need to see over 200,000 jobs created over the course of a year before the policymakers deviate from their stated plan to keep interest rates at zero into mid-2015.
“That mid-2015 date is fairly sticky,” Hatzius said.