Goldman Sachs reduces odds of U.S. recession to 15% from 20%

Goldman Sachs analyst Jan Hatzius writes that following positive inflation and labor market news over the past month, the firm is reducing its estimated probability of a U.S. recession to 15% from 20%. The firm also notes that it is “substantially more optimistic” than most other forecasters in terms of its baseline GDP growth forecast, which averages 2% through the end of 2024. While Q3 GDP tracking likely overstates the economy’s true momentum, given the still-soft business surveys and the much slower growth in real gross domestic income, and there are some fundamental reasons to expect a deceleration in Q4, including the resumption of student loan payments and a near-term hit to housing from the recent increase in mortgage rates, the slowdown is expected to be “shallow and short-lived”, the analyst states. Goldman Sachs is also unconcerned about the 0.3 percentage point increase in the unemployment rate to 3.8% in August reported last week because it was entirely driven by an increase in labor force participation, adding that the employment/population ratio remained “stable at a cycle high”.