The market's expectations for an interest rate increase this month fell after a disappointing August jobs report, but Goldman Sachs still thinks the Federal Reserve will pull the trigger, said Jan Hatzius, the firm's chief economist.
The Labor Department reported U.S. employers added just 151,000 jobs last month, compared with estimates for 180,000 new positions and after two months of gains in excess of 250,000 hires.
"It was a little below expectations, but for us, it's just enough to make it a little more likely than not that they do go in September," Hatzius told CNBC's "Squawk on the Street" on Friday.
While a hike at the Fed's September meeting will be a close call, a gain of 151,000 jobs is clearly above the central bank's estimate of what it takes to improve labor markets over time, he added. Hatzius further noted three- and six-month averages are well above the August data.
The market believes the probability of a rate increase this month is just 24 percent, according to the CME's FedWatch tool. Hatzius said those odds will need to rise in the lead-up to the Federal Open Market Committee meeting from Sept. 20-21.
Investors should watch for Fed commentary that the August report moved the labor market forward, which would be the sign policymakers view the data as good enough to hike, Hatzius said. On the other hand, if Fed speakers emphasize that the report was below expectations and recent inflation figures have weakened, that would signal the central bank will likely leave rates unchanged.