• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Goldman: "We Now Expect QE To Continue Through Q2 2014 Vs. Our Prior Forecast Of Q3 2014"

Tyler Durden's picture


Until today, Goldman expected the Fed's tapering to start in December. Not any more: following today's better for part-time jobs than expected data, the squid has pulled its tapering prediction up to the September FOMC meeting: just what Zero Hedge said 2 months ago. But what just slapped ES across the face is the following from FRBNY's informal advisor Hatzius: "We now expect purchases to continue through Q2 2014 (vs. our prior forecast of Q3 2014), in line with the guidance given by Chairman Bernanke at the last FOMC press conference." That's ok Goldman, we are used to you being wrong. Speaking of, any more Stolper recos?

From Goldman's Jan Hatzius

Better-than-Expected Employment Report, QE Tapering Likely in September

BOTTOM LINE: The June employment situation report was better-than-expected, with stronger June payrolls growth, upward revisions to prior months, and a larger-than-expected increase in earnings. The unemployment rate remained unchanged, but the employment-to-population ratio and labor force participation rate increased. In light of the better-than-expected labor market data over the past few months, we are bringing forward our call for the Fed tapering QE purchases from the December FOMC meeting to the September meeting. However, we are not changing our forecast for the date of the first fed funds rate increase, which remains in Q1 2016. Fed officials are likely to work hard to dissuade the market from raising its short-term interest rate expectations. This may include changes in the FOMC statement around the conditions for the first hike in the funds rate, including—if needed—a reduction in the 6.5% unemployment threshold.


1. Payroll employment grew a stronger-than-expected 195k in June (vs consensus +165k). Gains were widespread across industries, with the largest gains in leisure & hospitality (+75k), professional & business services (+53k), and retail trade (+37k). Manufacturing continued to be a small drag on job growth (-6k), while construction added 13k. The Federal government ex-postal service lost only 5k jobs, with the report as a whole showing relatively little discernible impact from the sequester. Net job growth was revised up by 70k over the past two months, bringing average payrolls growth to 196k over the past three months.

2. The unemployment rate remained unchanged at 7.6% (7.557% on an unrounded basis). However, the employment-to-population ratio increased by one tenth to 58.7% and the labor force participation rate rose by one tenth to 63.5%. Employment increased 160k according to the household survey, but rose 350k on a "payroll-consistent" basis, adjusting for definitional differences between the two surveys.

3. Earnings grew an unexpectedly strong 0.4% in June (vs consensus +0.2%), bringing the year-over-year rate of increase to 2.2%. Average weekly hours were unchanged at 34.5. The index of aggregate weekly payrolls?the product of employment, hours per worker, and earnings per hour?rose 0.6%, a decent proxy for wage & salary income growth.

4. In light of the better-than-expected labor market data over the past few months, we are bringing forward our call for the Fed tapering QE purchases from the December FOMC meeting to the September meeting. We expect that purchases may be reduced from the current rate of $85bn per month to $65bn per month, with most or all of the adjustment occurring through reduced Treasury purchases. We now expect purchases to continue through Q2 2014 (vs. our prior forecast of Q3 2014), in line with the guidance given by Chairman Bernanke at the last FOMC press conference. We are not changing our call for the date of the first fed funds rate increase, which remains in Q1 2016, at which point we forecast an unemployment rate of 6.0%. Fed officials are likely to work hard to dissuade the market from raising its short-term interest rate expectations. This may include changes in the FOMC statement around the conditions for the first hike in the funds rate, including—if needed—a reduction in the 6.5% unemployment threshold.

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Fri, 07/05/2013 - 10:14 | 3723485 Quinvarius
Quinvarius's picture

If by Taper you mean run out of stuff to buy and find a new way to throw money at the markets, maybe.

Fri, 07/05/2013 - 10:16 | 3723493 Rubicon
Rubicon's picture


Fri, 07/05/2013 - 10:21 | 3723525 THX 1178
THX 1178's picture

I think TPTB will do everything to absolve themselves of the eventual collapse-of-everything. This means they will likely have some military/oil event be the cause of the initial deflation instead of the taper. The event will happen between now and when the taper was supposed to happen. This way TPTB will be able to say, "see, we were not going to hyperinflate, but instead taper... but look what we have to do now. Its an emergency!" You know what I'm saying? covering their tracks and scapegoating.

Fri, 07/05/2013 - 10:29 | 3723548 Cognitive Dissonance
Cognitive Dissonance's picture

I find it extremely interesting that just when the Fed needs to regain some credibility, thus Ben's talk of taper to dispel the image of "Mad Men Printer", that the BOE and the ECB are ramping up their "dovish" talk and have announced that the printing presses are manned and ready.

It seems that the various major central banks are simply passing the hot fiat (liquidity) potato. And just in time to help counter China's determination to taper as well.

<Belly up to the bar boyz. Shots of Liquidity for everyone....and it's on me.>

Fri, 07/05/2013 - 10:16 | 3723495 markmotive
markmotive's picture

So another sh!tstorm for gold?

Fri, 07/05/2013 - 10:22 | 3723529 augustusgloop
augustusgloop's picture

and shitstorm for bonds... damn those hogs!

Fri, 07/05/2013 - 10:28 | 3723552 Al Huxley
Al Huxley's picture

Another puzzling day for Bernanke - Look Ben, look how much stronger the economy just got.  How often do you guys mark your portfolio to market?  Do you have atop-loss on those Treasuries you're holding, or are you going to just hold them for the interest income to maturity?  Maybe slip us a little update through Hilsenrath later, what do you say?

Fri, 07/05/2013 - 10:32 | 3723569 Cognitive Dissonance
Cognitive Dissonance's picture

So you're saying Hilsenrath is some sort of a pass through bowel movement?

Fri, 07/05/2013 - 10:32 | 3723570 fonzannoon
fonzannoon's picture

Who's mansion do you think Gundlach and Gross are at today celebrating together the mangling of their clients with their recent predictions?

Fri, 07/05/2013 - 10:34 | 3723579 Al Huxley
Al Huxley's picture

Don't they have some sort of secret underground lair where they hold those celebrations?

Fri, 07/05/2013 - 10:21 | 3723509 markmotive
markmotive's picture

BTW - the financial system is as levered as it was in 2008. Any withdrawal of liquidity could result in another Lehman-type event.

Certainly, China and Japan are exposed to massive risks if their ponzi schemes aren't financed. The US is better off but not by much. How will Fed tightening impact China and Japan? And what repercussions will those effects have on the US and Fed policy? It's a vicious cycle.

Fri, 07/05/2013 - 10:18 | 3723510 slaughterer
slaughterer's picture

Goldman has been advising its clients of a Sept. taper begin for months now.  There is disinformation here.  

Fri, 07/05/2013 - 10:20 | 3723515 Cursive
Cursive's picture


GS does it for the lulz....

Fri, 07/05/2013 - 10:25 | 3723540 GVB
GVB's picture

"Forecasts" are BS

Fri, 07/05/2013 - 10:28 | 3723550 Headbanger
Headbanger's picture

Translation:  RUN FOREST RUN!

Fri, 07/05/2013 - 10:15 | 3723489 DaddyO
DaddyO's picture

After the "Summer of Recovery", bitches...

Green Shoots turning brown!


Fri, 07/05/2013 - 10:17 | 3723490 101 years and c...
101 years and counting's picture

so, crash stocks now so there is no taper??  if ben were to actually taper, bonds would collapse.  anyone see the bond fund outflows in the last month?  over $60B pulled out of bond funds. 

Fri, 07/05/2013 - 10:20 | 3723519 fonzannoon
fonzannoon's picture

This "taper" that ain't gonna happen (maybe one month for show) was always about the legacy of the Bernak. Look how he left his post. His steadfast ability to not listen to his critics allowed the economy to recover, as the jobs number improve. The markets have all rallied under his tenure and now he has set forth the path of easing up on the stimulus that has been injected. Interest rates have begun to rise as a healthy sign of his good work.

He truly has left at the peak of his performance and will be remembered as a national hero.

Too bad right after he leaves the big fuckin thing is gonna happen and the next person will just have to ram down the print button all over again.

Fri, 07/05/2013 - 10:42 | 3723613 Bay of Pigs
Bay of Pigs's picture

+1 Brilliant ZH satire.

Fri, 07/05/2013 - 10:48 | 3723637 fonzannoon
fonzannoon's picture

Satire is a much longer way of saying CNBC

Fri, 07/05/2013 - 10:18 | 3723494 ekm
ekm's picture


Collateral call on the repo market imminent.


Taper is so old news now.

Fri, 07/05/2013 - 10:22 | 3723531 Jake88
Jake88's picture

that would make for one ugly shit storm

Fri, 07/05/2013 - 10:31 | 3723562 sudzee
sudzee's picture

And no, paper PM's will no longer be accepted as collateral.

Fri, 07/05/2013 - 10:18 | 3723502 arkel
arkel's picture

Really? If we taper, who is going to buy those US bonds? 10Y is already at 2.7%. How can we afford to pay the interest on the debt especially if rates are rising? Why can't everyone see this? Are they blind? The Fed will continue at $85 B and will probably increase it. They have no choice unless they want a legitimate default.



Fri, 07/05/2013 - 10:21 | 3723513 SheepDog-One
SheepDog-One's picture

What? Well of course they want the collapse, it's been planned for decades to bring about their 1 world bank, 1 world currency, 1 overall world govt. 

Not seeing this obvious fact is the real blindness.


Fri, 07/05/2013 - 10:25 | 3723541 arkel
arkel's picture

Yes, but the collapse will not come by legitimate default, but a devaluation of the currency aka more QE. Political pressure will not allow the govt to taper / tighten.

Fri, 07/05/2013 - 10:24 | 3723535 Quinvarius
Quinvarius's picture

We need to look forward to a new less transparent method of gorging the banks and government on the free money they need.  The US takes on 6 trillion in total liabilities each year.  We need to plan on how to handle that shitshow without an audience.

Fri, 07/05/2013 - 11:58 | 3723808 DR
DR's picture

Higher rates will mean less loans but banks can thrive by buying T bonds due to carry on the yield curve.

Do you really think your going to see the interest on savings rise?

Fri, 07/05/2013 - 10:18 | 3723507 SheepDog-One
SheepDog-One's picture

OK so therefore QE ends in Q3 of 2013....got it!

Fri, 07/05/2013 - 10:19 | 3723512 Jake88
Jake88's picture


Fri, 07/05/2013 - 10:20 | 3723516 Meat Hammer
Meat Hammer's picture

The squid has to pretend that it's not part of the Circle of Trust.

Fri, 07/05/2013 - 10:20 | 3723518 valley chick
valley chick's picture

QE nevers ends....period.  All bs to control the casino.

Fri, 07/05/2013 - 10:58 | 3723520 BadDog
BadDog's picture

They will do what the bond market tells them to do.  Right now it's hinting at, buy me if you don't me to shove your taper up your ass.

More QE, more war and more surveillance.  It's what's for dinner.

Fri, 07/05/2013 - 10:21 | 3723527 q99x2
q99x2's picture

There is no difference between Goldman Sachs and the third Reich. People need to begin boycotting these monsters in print and with their money.

There is a war on and it does no good to work with the enemy in public.

Fri, 07/05/2013 - 10:25 | 3723539 EclecticParrot
EclecticParrot's picture

Seasons don't fear the Taper

Nor do the wind, the sun and the rain

We can be like they are

C'mon baby, don't fear the Taper

Come and take my hand

Fri, 07/05/2013 - 15:36 | 3724482 WmMcK
WmMcK's picture

40,000 everyday, well, maybe a little more now.

Fri, 07/05/2013 - 10:26 | 3723545 SheepDog-One
SheepDog-One's picture

Wow people actually do believe we'll just run on QE forever now....amazing how easily the monkeys are trained.

Fri, 07/05/2013 - 10:30 | 3723558 fonzannoon
fonzannoon's picture

I think the point is, QE 4eva or they pull the plug tomorrow and the end result is the same.

There is no salvaging the dollar at this point. There is a point where interest rates hit escape velocity if they take the fed out of it. Game over. If the fed continues on with QE until they own every treasury, they will just (or more likely continue) to buy stocks and real estate and He Man action figures until they own everything.

Either path leads to the same place. Why we bother arguing about how we get there constantly is beyond me.

Fri, 07/05/2013 - 10:36 | 3723592 Bay of Pigs
Bay of Pigs's picture

fonz, you selling moar gold and silver again? Look at them tumble. Damn you anyway!

Fri, 07/05/2013 - 10:46 | 3723630 fonzannoon
fonzannoon's picture

Hey BOP, I have never been more uninterested in PM's. I ain't sellin, and I am not going to torture myself on here by being glued to the price movement.

I think Cognative Dissonance said it best above. What we are watching is one giant globally coordinated central bank throwing the hot potato around.

Everyone is getting burned right now. Bonds, Dividend paying stocks, precious metals, MLP's etc....

The only people who are hangin in there are the people who own the magical S&P.

Fri, 07/05/2013 - 10:53 | 3723656 Bay of Pigs
Bay of Pigs's picture

Don't forget King Doelarr!


Fri, 07/05/2013 - 11:54 | 3723798 Meat Hammer
Meat Hammer's picture

Look at the 10Y bond yield.  Yikes!

Fri, 07/05/2013 - 10:31 | 3723563 tarsubil
tarsubil's picture

QE will be planned to end around the time of the next crisis after which Super QE will commence. Super QE will go until the next crisis after which Super Duper QE will commence. Ad infinitum.

Fri, 07/05/2013 - 10:39 | 3723606 sudzee
sudzee's picture

I'm thinkin we are soon to see another increase in margins for PM's and another decrease for bonds.

Fri, 07/05/2013 - 10:43 | 3723619 trillion_dollar...
trillion_dollar_deficit's picture

Whatever happens Taper or end of QE, there's abso-fucking-lutely no way it will be allowed to begin before the 2014 midterms. No way in hell.

Fri, 07/05/2013 - 10:52 | 3723654 robertocarlos
robertocarlos's picture

Reading the local news I see that the People have almost gotten it. There is a class action suit against the Cash Store. Close, but it's the Federal Reserve you need to sue. 

Fri, 07/05/2013 - 12:11 | 3723849 Herkimer Jerkimer
Herkimer Jerkimer's picture





Isn't Goldman an owner of the FED, so what is the dilly-dallying about?

I wouldn't believe them because they are part of the FED, as they are setting us up for a front run.


On the other hand though…



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