Odd Lots Jan Hatzius on the Narrow Path to Avoid a Hard Landing
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Aug 8, 2022 
Jan Hatzius, Chief Economist at Goldman Sachs, delves into the precarious balance between controlling inflation and avoiding a hard landing for the U.S. economy. He discusses the intricate labor market dynamics and their impact on inflation, noting how unexpected factors have complicated predictions. Hatzius highlights the challenges faced by the Federal Reserve and questions the reliability of current economic indicators. His insights reveal why many economists missed the mark in forecasting inflation trends over the past year.
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Path to 2% Inflation
- Reducing inflation to 4% will be relatively easy due to easing commodity prices and supply chain improvements.
- However, getting from 4% to 2% requires labor market adjustments, specifically reducing open positions without increasing unemployment.
Inflation Target
- A 4% inflation rate is unacceptable to the Fed, with 2-2.75% being more tolerable.
- Public dislike of inflation pressures the Fed to target 2%, despite potential economic pain.
Labor Market Misunderstanding
- Economists underestimated labor market tightness, impacting inflation predictions.
- Job openings, previously a secondary metric, are now crucial for assessing labor market balance.