US Non-Farm Payrolls Preview: Goldman Turns Bearish on Hiring as Geopolitical Risks Mount

As Wall Street grapples with a fresh energy supply shock, investor attention is shifting rapidly to Friday's February Non-Farm Payrolls (NFP) report. The data serves as a critical litmus test for the US economy's resilience in the face of renewed inflationary pressures driven by Middle East tensions.

Goldman Sachs: Expect a Downside Surprise

While the market consensus anticipates moderate job growth, Goldman Sachs has issued a notably bearish forecast, predicting only 45,000 new jobs added in February.

The investment bank cites several temporary but significant headwinds:

• Weather Impact: severe winter conditions are estimated to have shaved 5,000 jobs off the construction sector.
• Labor Disputes: New strikes are expected to subtract approximately 31,000 from the headline number.
• Government Hiring: A continued freeze on federal recruitment is acting as a drag on public sector growth.

The Stagflation Nightmare

The confluence of rising oil prices and potentially weak labor data presents a difficult scenario for the Federal Reserve.

• Yields Rising: The 10-year US Treasury yield has risen nearly 3 basis points to 4.171%, driven by inflation expectations rather than growth optimism.
• The “Bad News” Factor: typically, weak jobs data would boost equities by fueling rate-cut bets. However, with WTI crude threatening to break higher, a weak labor market combined with high inflation signals stagflation—a scenario where the Fed cannot cut rates despite slowing growth.

Revisions Looming

Traders should also watch for benchmark revisions. Goldman estimates that due to slowing net migration, the labor force participation baseline may be revised downward by 300,000 to 400,000. While this is unlikely to drastically shift the unemployment rate immediately, it points to a tighter structural labor market than previously thought, further complicating the central bank's policy path.