Goldman Sachs economists have raised their forecast for the probability of a US recession within the next year to 25%, up from a previous estimate of 15%. Despite this increased likelihood, the economists maintain that the risk of a severe economic downturn remains limited.
In a recent client report dated August 4, 2024, Goldman Sachs, led by economist Jan Hatzius, emphasized that the overall state of the US economy remains stable. They noted the absence of significant financial imbalances and highlighted that the Federal Reserve has substantial leeway to lower interest rates promptly if needed.
The recent uptick in unemployment and a decline in job growth have fueled concerns about a potential slowdown. However, Goldman Sachs argues that these factors alone do not signal an imminent recession. The team believes the Federal Reserve’s anticipated rate cuts will be sufficient to address any emerging risks, though they acknowledge that if job growth continues to falter in August, a more substantial rate cut could be warranted.
Goldman Sachs’s projections are more conservative compared to those of JPMorgan Chase & Co. and Citigroup, which foresee a 50 basis point cut in September. Goldman Sachs expects a 25 basis point reduction in September, followed by additional cuts in November and December.
Despite recent job market challenges, Goldman Sachs remains optimistic. They argue that job openings suggest robust demand, and no clear trigger for a downturn has emerged. This cautious optimism reflects their view that while recession risks have increased, the economic fundamentals are still strong.
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