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CNBC TRANSCRIPT: CNBC'S "THE STRATEGY SESSION" SPEAKS WITH GOLDMAN SACHS CHIEF U.S. ECONOMIST JAN HATZIUS TODAY ON CNBC

WHEN: Today, Thursday, September 8th

WHERE: CNBC's "The Strategy Session"

Following is the unofficial transcript of an interview with Goldman Sachs Chief U.S. Economist Jan Hatzius today on CNBC's "The Strategy Session." All references must be sourced to CNBC.

DAVID FABER: ONE OF THE KEY QUESTIONS BEING ASKED IN THIS MARKET, SIMPLY WHAT IS THE CHANCE OF RECESSION IN THE U.S.? IT'S A QUESTION EVERY INVESTOR SEEMS TO BE ASKING EVERY DAY AND WHEN WE ASKED OUR NEXT GUEST WHEN HE WAS LAST WITH US IN MAY.

GARY KAMINSKY: WHEN IS THE NEXT RECESSION IN THE U.S. GOING TO BE?

JAN HATZIUS: I THINK IT'S YEARS AWAY.

KAMINSKY: SO WE'RE EARLY INTO A RECOVERY CYCLE?

HATZIUS: YES, I THINK THERE'S STILL A LONG WAY TO GO. THE UNEMPLOYMENT RATE IS STILL 9%. WE'RE NOWHERE CLOSE TO THE, YOU KNOW, TO REALLY TIGHT LABOR MARKET THAT USUALLY PRECIPITATES A RECESSION. I THINK WE'LL STILL BE IN RECOVERY FOR A FEW YEARS.

FABER: SINCE THEN, PLENTY SEEMS TO HAVE CHANGED AND MUCH OF IT NOT FOR THE BETTER. WHAT DOES JAN HATZIUS THINK NOW? GOLDMAN SACHS'S CHIEF ECONOMIST JOINS US FROM THE FIRM'S HEADQUARTERS IN NYC. JAN, NICE TO BE WITH YOU. YEARS AWAY FROM THAT RECESSION STILL?

HATZIUS: THAT WOULD STILL BE MY BASELINE BUT THE NEWS SINCE THEN HAS BEEN CLEARLY ON THE NEGATIVE SIDE. THE RISK SEEMS SIGNIFICANTLY HIGHER THAN IT DID BACK THEN SO I WOULD GIVE THE PROBABILITY OF A RENEWED RECESSION PROBABLY AT SOMETHING LIKE ONE IN THREE AT THIS POINT, THAT'S DEFINITELY GONE UP BUT THE BASELINE IS IT'S GOING TO TAKE A LONG TIME.

FABER: NOW I NOTICED TODAY YOU'VE GIVEN UPSIDE RISK TO Q3 GDP AS A RESULT OF TRADE BALANCE FIGURES AND THE LIKE, CORRECT?

HATZIUS: YES, THAT'S JUST TRACKING THE INDICATORS AS THEY ROLL IN AND AS IT HAPPENS, WHILE SOME OF THE INDICATORS ESPECIALLY THE SURVEY BASED ONES LIKE CONSUMER CONFIDENCE IN PARTICULAR HAVE BEEN VERY WEAK, THE NUMBERS THAT THE COMMERCE DEPARTMENT USES TO ESTIMATE GDP AFTER THE END OF THE QUARTER HAVE ACTUALLY GENERALLY LOOKED A LITTLE FIRMER SO WE'VE BEEN WORKING WITH THE 1% NUMBER FOR THE THIRD QUARTER BUT IT NOW LOOKS LIKE IT MIGHT COME IN A LITTLE STRONGER THAN THAT.

KAMINSKY: JAN, I'VE ALWAYS WONDERED, MAYBE YOU COULD WALK US THROUGH THE MECHANICS OF HOW YOU ACTUALLY BUILD THESE MODELS. BECAUSE OBVIOUSLY YOU COME OUT AND YOU'VE GOT SIGNIFICANT INFLUENCE OVER THE GLOBAL EQUITY MARKETS, FIXED INCOME MARKETS, ON THE TYPE OF MODELS YOU CREATE TO MAKE THESE PREDICTIONS. WALK US THROUGH THE MECHANICS OF WHEN YOU CAN COME OUT AND MAKE A CALL AS TO THIS IS WHAT WE ANTICIPATE 2012 GROWTH AS AN EXAMPLE TO LOOK LIKE.

HATZIUS: WELL WE HAVE ONGOING MODELS FOR TRACKING BOTH WHAT'S GOING ON IN THE ECONOMY AT THE MOMENT, SO FIGURING OUT WHERE WE THINK THIRD QUARTER GDP IS GOING TO BE, THAT'S NOT REALLY A FORECAST, THAT'S REALLY MORE A DIAGNOSIS OF WHAT'S GOING ON AT THE MOMENT, AND ALSO OF GROWTH OVER SAY THE NEXT YEAR TO TWO YEARS, WHICH IS SORT OF THE MAIN FOCUS FOR THE FORECAST.

KAMINSKY: SO SPECIFICALLY WHAT WOULD BE THE THREE VARIABLE INPUT POINTS THAT GO INTO THAT MODEL THAT HAVE THE MOST FLEXIBILITY TO MAKE A DETERMINATION.

HATZIUS: I MEAN, THINGS, DRIVERS WOULD CERTAINLY BE THINGS LIKE BIG MOVES IN OIL PRICES FOR EXAMPLE, BIG MOVES IN EQUITY PRICES AND FINANCIAL CONDITIONS AND THEN CHANGES IN ECONOMIC POLICY. I MEAN, IF WE FOR EXAMPLE FIND THAT THERE WILL BE MORE FISCAL CONSOLIDATION, MORE FISCAL RESTRAINT IN 2012 THAN WHAT WE THOUGHT PREVIOUSLY, THAT WOULD BE A NEGATIVE FACTOR AND VICE VERSA. A LOT OF IT IS ALSO LOOKING AT HOW THE ECONOMY IS TRACKING AT THE MOMENT IN ORDER TO GET A BASELINE OF THAT.

FABER: OF COURSE, AS WE ALL KNOW PSYCHOLOGY FIGURES SO PROMINENTLY WOULD SEEM TO A CERTAIN EXTENT IN THESE KINDS OF THINGS AND WE HEARD SO OFTEN ABOUT IT BECOMING A SELF-FULFILLING PROPHECY, THAT BEING THE NEGATIVE OUTLOOK THAT PEOPLE HAVE EVEN THOUGH IT MAY NOT BE BASED IN REALITY. HOW DO YOU GO ABOUT FIGURING THAT OUT, JAN?

HATZIUS: IT'S TRICKY, CERTAINLY CHALLENGING. WE DO HAVE SOME MEASURES OF THE SOFTER FACTORS, OR MORE PSYCHOLOGICAL FACTORS, WE CAN LOOK AT THE CONFIDENCE FIGURES, WE CAN LOOK AT THINGS THAT ARE TYPICALLY CLOSELY CORRELATED WITH CONFIDENCE, SUCH AS YOU KNOW HEADLINES ABOUT LABOR MARKETS OR ABOUT POLITICAL DEVELOPMENTS.

FABER: I WANT TO STOP ASKING YOU HOW YOU DO YOUR JOBS AND GET TO YOUR THOUGHTS WITH BERNANKE COMING UP IN LESS THAN AN HOUR AND A HALF. YOU WERE EARLY WITH YOUR EXPECTATION THAT WE WOULD GET SO CALLED TWIST REFERENCE TO THAT 1961 CHUBBY CHECKER SONG. DO YOU THINK THAT IN FACT WE WILL START TO SEE OR WHAT ARE YOUR EXPECTATIONS IN TERMS OF WHAT BERNANKE WILL GIVE ANY VOICE TO WHAT WE HEAR FROM SHORTLY?

HATZIUS: HE'S GOING TO TALK ABOUT THE ECONOMIC OUTLOOK. I THINK IT'S PROBABLY GOING TO BE RELATIVELY DOWNBEAT. I DON'T THINK HE'S GOING TO TELL US WHAT'S GOING TO HAPPEN AT THE NEXT MEETING BECAUSE THAT ACTUALLY HAS TO BE CONSIDERED AT THE MEETING. IT IS NOW A TWO-DAY MEETING SEPTEMBER 20TH AND 21ST, AND OUR EXPECTATION AT THAT MEETING IS THAT WE WILL GET ADDITIONAL EASING MOST LIKELY THROUGH SOMETHING THAT HAS BEEN CALLED THE TWIST, YES.

KAMINSKY: JAN, GO BACK TO AGAIN TRYING TO DETERMINE WHAT GROWTH LOOKS LIKE. YOU SAID OIL HAS A MAJOR IMPACT. NOW OBVIOUSLY THE COMMODITY'S BEEN LINKED TO THE WEAKENING DOLLAR. TODAY THE DOLLAR AT A TWO-MONTH HIGH GIVEN THE EURO WHAT'S GOING ON WITH THE EUROPEAN CENTRAL BANK TODAY. IS IT YOUR CONTENTION THAT A STRENGTHENING DOLLAR, GIVEN THE LIKELY RAMIFICATIONS WOULD ACTUALLY BE VERY POSITIVE FOR 2012, AND THE BACK END OF 2011 GROWTH?

HATZIUS: NO, GENERALLY WE WOULD THINK THAT IF THERE'S A STRENGTH, IF THE DOLLAR STRENGTHENS, THAT'S GOING TO MAKE IT HARDER FOR U.S. EXPORTERS TO INCREASE THEIR SALES ABROAD, AND THAT THAT WOULD BE A DRAG ON GROWTH, IT'S NOT A HUGE FACTOR UNLESS THE MOVES ARE VERY LARGE, BECAUSE THE U.S. ECONOMY IS SO BIG THAT THE EXTERNAL SIDE IS NOT AS IMPORTANT AS FOR SMALLER ECONOMIES THAT ARE MORE SORT OF WHIPPED AROUND BY CURRENCY CHANGES BUT THE DIRECTION IS THAT A STRONGER CURRENCY IS A SHORT TERM NEGATIVE ON THE GROWTH.

FABER: JAN, FINALLY ON OPERATION TWIST WHICH YOU MENTIONED DO YOU THINK IT'S GOING TO WORK? IS THERE ANY REAL BENEFIT TO BE TAKEN AT THIS POINT FROM MOVING LONG-TERM RATES EVEN LOWER WHEN PEOPLE DON'T SEEM TO BE REFINANCING THEIR MORTGAGES EVEN WITH RECORD LOW RATES FOR EXAMPLE?

HATZIUS: I THINK YOU'RE ABSOLUTELY RIGHT THAT THE TRANSMISSION MECHANISM IS MORE CLOGGED THAN NORMAL SO I DON'T THINK IT'S AS POWERFUL AS IT NORMALLY WILL BE, WOULD BE BUT I DO THINK THERE WOULD BE SOME POSITIVE IMPACT BUT WE'RE TALKING PROBABLY A FEW TENTHS OF A PERCENTAGE POINT ON GDP GROWTH NOTHING REALLY DRAMATIC.

FABER: JAN AS ALWAYS APPRECIATE YOUR TIME THANK YOU.

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