Recession Odds Cut to 20% by Goldman. Why the Bank Thinks the Economy Will Dodge a Slump.
Updated Aug 19, 2024, 10:46 am EDT / Original Aug 19, 2024, 7:20 am EDT
There’s now just a 20% chance that the U.S. suffers a recession over the next 12 months, according to Goldman Sachs
0.08%
.“The data released since Aug. 2—including retail sales and jobless claims this week—shows no sign of recession,” a team of economists led by Jan Hatzius said in a note to clients on Saturday. Figures published on Thursday showed that spending rose at a faster clip than expected last month and that the number of people filing for unemployment insurance fell from the previous week.
Goldman raised its recession probability to 25% earlier this month, citing weaker-than-expected July jobs numbers. Before that, the economists had been pegging the chances of an economic slump at 15% for nearly a year.
Hatzius and Co. said they’d probably cut their odds back down to 15% if the August jobs report, set to be published on Sept. 6, “looks reasonably good.”
Soft data for July rattled markets because it triggered the Sahm rule, which states that a recession is under way when the three-month average U.S. unemployment rate lands half a percentage point higher than its 12-month low. Stocks fell sharply at the start of August but they have since pared back all of their losses, with the benchmark S&P 500
0.97%
index notching its best five-day stretch of 2024 last week.The apparent robustness of the U.S. economy will also likely encourage the Federal Reserve to take a more cautious approach to lowering interest rates, according to Hatzius’s team. The economists said they are now “more confident” that the central bank will slash borrowing costs by just 25 basis points, or a quarter of a percentage point, when its next meeting ends on Sept. 18, although they added that a weak August jobs report could put a cut of half of a percentage point back on the table.
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