TechFlow news — Goldman Sachs economists have raised the probability of a U.S. economic recession next year from 15% to 25%. However, they also noted that despite a significant rise in unemployment, there are "several reasons not to worry about a recession."
Goldman economists led by Jan Hatzius stated, "We still see limited risks of a recession. The overall economy still looks healthy, there are no major financial imbalances, and the Federal Reserve has substantial room to cut interest rates, which it could do rapidly if necessary." Notably, Goldman's outlook for the Fed is less aggressive than that of JPMorgan and Citigroup.
Hatzius's team expects the Federal Reserve to lower the benchmark interest rate by 25 basis points each in September, November, and December.
In contrast, JPMorgan and Citigroup anticipate a 50-basis-point rate cut in September.
The Goldman report stated, "Our forecast assumes employment growth will rebound in August, and the FOMC will view a 25-basis-point cut as sufficient to address any downside risks. If we are wrong and the August jobs report is as weak as July's, a 50-basis-point cut in September becomes more likely."
The economists added that they remain skeptical about whether the U.S. labor market faces a significant risk of rapid deterioration. They hold this view because job openings indicate demand remains solid, and there is no obvious shock triggering a downturn.
