Goldman Sachs Raises US Recession Risk to 25%

Economists See ‘Limited’ Recession Risk

Econ­o­mists at Gold­man Sachs have raised the like­li­hood of the US econ­o­my slip­ping into a reces­sion with­in the next 12 months from 15% to 25% while con­tin­u­ing to view the risk of reces­sion as lim­it­ed, accord­ing to a report.

Potential for Fed Rate Cuts

The Gold­man Sachs econ­o­mists said they think job growth will improve this month and that will prompt the Fed­er­al Reserve to cut inter­est rates by 25 basis points, or 0.25% per­cent­age points. How­ev­er, they not­ed that if the August jobs report is as slug­gish as July’s, the Fed could opt for a larg­er 50-basis-point cut.

Mixed Economic Signals

Last week, the Bureau of Labor Sta­tis­tics released its lat­est jobs report that showed US job growth slowed to 114,000 in July, less than the 175,000 gain fore­cast. The unem­ploy­ment rate also rose unex­pect­ed­ly from 4.1% to 4.3%, the high­est lev­el since Octo­ber 2021.

Despite these mixed sig­nals, the Gold­man econ­o­mists said they “con­tin­ue to see reces­sion risk as lim­it­ed” and not­ed the Fed­er­al Reserve has ample room to cut inter­est rates if need­ed to sup­port the economy.