(Bloomberg) -- The US labor market stands at a potential “inflection point” where any further softness in demand for workers will hit jobs, not just job openings, according to economists at Goldman Sachs Group Inc.

The current strength of labor demand is unclear, with healthy nonfarm payrolls contrasting with rising initial and continuing jobless claims in recent weeks, economist Jan Hatzius wrote in a note to clients.

“Ultimately, the key driver of labor demand is economic activity, and GDP growth has slowed meaningfully,” Hatzius wrote. So despite the Federal Reserve’s “surprisingly hawkish” projections last week, “we feel good about our forecast of two cuts” in September and December.

Fed officials last week dialed back their expectations for interest-rate cuts to just one this year, instead of the three reductions penciled in previously. Goldman as recently as May had been betting the Fed would begin cutting rates in July. 

Hatzius said the spike in inflation seen in the first quarter was likely an “aberration,” with reports in the remainder of the year set to show flat core goods prices and a gradual deceleration in both shelter and non-housing core service inflation. 

As for the economic growth outlook, Goldman expects a moderate pickup in the second half as “the impulse from financial conditions is turning more positive” and as the drag from inventories and net trade is set to end. But overall, most of the recent slowdown is likely here to stay.

“Real income growth has softened, consumer sentiment has fallen anew, and there are early signs of an increase in election-related uncertainty that could weigh on business investment in coming months,” Hatzius wrote in the note dated June 17.

Recent data has shown the main drivers that have supported the resilience of American consumer are losing steam. Meantime, inflation cooled in May, but policymakers have stressed that they’d need to see several months of price pressures receding before they consider lowering interest rates. 

(Adds details on growth outlook in sixth paragraph and background on recent data in eighth.)

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