And so it begins, from Goldman which has been far too hawkish this cycle all along:
Relative to the turmoil in the financial markets, the economic numbers have been remarkably stable recently. Admittedly, jobless claims have risen and November payrolls fell somewhat short of expectations. But a report showing 155k new jobs and a decline in the (unrounded) unemployment rate to a new 48-year low of 3.67% is hardly weak in an absolute sense. Combined with the rebound in the November ISMs and firm consumer confidence readings, Friday’s report kept our current activity indicator (CAI) at 2.8% in November. This is down from a pace of 3.6% over the summer but still roughly 1 percentage point above the economy’s potential growth rate. In other words, our CAI implies that growth has transitioned from exceptionally strong to merely strong.
…much more significant change is the sharp tightening in financial conditions…for a variety of reasons—including an initial bout of concern about Chairman Powell’s “long way from neutral” remark, the inevitable slowing of GDP and profit growth from their exceptionally strong pace, and the broadening tension between the US and China—rising investor anxiety has pushed up our FCI by about 80bp since early October. If the FCI remains constant at its current level, we estimate that tighter financial conditions would take ¾-1pp off real GDP growth over the next year.
