Goldman Sachs cuts odds of U.S. recession to 20% after retail and jobs data
Goldman Sachs has cut its probability forecast for a U.S. recession to 20% shortly after raising it, as fresh labor market data sparked a reassessment of market views on the economy.
Economists at Goldman earlier this month raised their 12-month U.S. recession probability from 15% to 25% after the U.S. July jobs report of Aug. 2 showed nonfarm payrolls grew by a less-than-expected 114,000. That was down from the downwardly revised 179,000 of June and below the Dow Jones estimate of 185,000.
The report triggered widespread concerns about the world’s largest economy, and contributed to the sharp — but ultimately brief — stock market sell-off at the start of the month.
It also triggered the “Sahm rule,” a historical indicator showing that the initial phase of a recession has begun when the three-month moving average of the U.S. unemployment rate is at least half a percentage point higher than the 12-month low.
Goldman initially cited this as a reason for hiking the probability of an economic downturn — but changed tack on Saturday, when it wrote in a note that it saw the odds down to 20% because data released since Aug. 2 showed “no sign of a recession.”