We just found out the Fed's rate path may be too aggressive, ex-Obama advisor Goolsbee says

  • The weak growth in jobs last month shows the U.S. economy is expanding only modestly, Austan Goolsbee says.
  • Fed policymakers have gotten "ahead of themselves" in projecting three interest rate hikes in 2017, he says.

The much-weaker-than-expected growth in jobs last month shows the U.S. economy is expanding, but only modestly, said Austan Goolsbee, former chairman of Obama's Council of Economic Advisors.

The Labor Department said Friday nonfarm payrolls grew just 138,000 last month versus expectations for 185,000. In addition, job growth in April and March was revised lower.

"With the revisions, we're not growing that fast," Goolsbee said on CNBC's "Squawk Box," arguing that nothing has changed on the growth front since Donald Trump took office in January.

The economy is still recovering from the Great Recession and it's going to take more time, Goolsbee said. Federal Reserve policymakers has gotten "ahead of themselves" in projecting for three interest rate hikes in 2017, he said.

Before the government's jobs report, the market saw a virtual lock for the second rate increase of the year at the Fed's next policy meeting, which is scheduled for June 13-14.

As central bankers look for any signs of increasing inflation, the Labor Department said average hourly earnings for workers in May grew 0.2 percent on a month-over-month basis, matching estimates.

The surprisingly weak government payrolls data follow Thursday's stronger-than-expected private-sector jobs report by ADP-Moody's Analytics, which showed 253,000 new positions were created at U.S. companies last month.

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