Goldman Sachs Reduces US Recession Odds to 20% from 25%, According to Reuters

Goldman Sachs has revised its forecast for the likelihood of the United States entering a recession over the next year, bringing it down from 25% to 20%. This adjustment follows the release of recent jobless claims and retail sales data.

Earlier this month, the investment bank had raised the recession odds from 15% after July’s unemployment rate surged to a three-year high, raising concerns about an economic downturn.

Jan Hatzius, the chief U.S. economist at Goldman Sachs, noted that the reduction in probability is primarily due to new data from July and early August, which shows no indications of a recession. He highlighted that sustained economic expansion would align the U.S. more closely with other G10 economies, where the Sahm rule has been accurate less than 70% of the time.

Recent reports indicated that the number of Americans applying for unemployment benefits fell to a one-month low, and retail sales in July experienced their largest increase in a year and a half.

Hatzius mentioned that if the August jobs report is reasonably positive, he might lower the recession probability to 15%. He also expects the Federal Reserve to reduce interest rates by 25 basis points in its upcoming September meeting, although he did not dismiss the possibility of a more significant 50 basis point cut if the jobs report underperforms.