Goldman Sachs may reduce the recession probability to 15% if the August jobs report, expected on September 6, is favorable.
In light of recent data on retail sales and unemployment, economists working for the global investment firm Goldman Sachs have reduced their forecast for the likelihood of a recession occurring in the United States within the next year to twenty percent.
In a report sent out to the company’s clients on August 17 and seen by Bloomberg, Goldman Sachs economist, led by Jan Hatzius, stated that the probability has decreased from their previous estimate of 25%.
The report also stated that Goldman Sachs would probably cut our recession probability back to 15%, where it stood for almost a year,” if the United States jobs report for August, which is scheduled to be published on September 6, “looks reasonably good.
In addition, the economists stated that they were “more confident” that the Federal Reserve will reduce interest rates by 0.25% when it meets in September.
However, they also stated that “another downside jobs surprise on September 6 could trigger” a 0.5% move.
As a result of retail sales numbers for July exceeding analyst projections, the United States stock market jumped last week, marking the largest surge since the beginning of the previous year.
The Labor Department provided numbers on August 15 that showed a one-month decrease in the number of people submitting new applications for unemployment benefits.
Tony Sycamore, an analyst at IG Markets, stated that Goldman Sachs probability cut was nothing more than “a minor tweak” and that it was highly unlikely to cause a good outbreak of risk-seeking flows across multiple asset classes, including cryptocurrency.
Markus Thielen, head of research at 10x Research, stated that Bitcoin traders “could welcome a rate cut, but there is also a risk that this implies a recession might be coming, and in that case, we would expect Bitcoin to correct lower, as it did in 2019.
Following the Federal Reserve’s decision to reduce interest rates in July 2019, he noted that “bitcoin initially surged by 20%” in a rally that was only temporary.
Thielen went on to say that despite the fact that the Federal Reserve “implemented two additional rate cuts later that year,” Bitcoin finished 2019 approximately 35 percent lower than it had been after the initial rate cut.
However, some economists don’t think the probability will drop.In a report published on August 15, JPMorgan Research increased its probability of a recession beginning in the United States and around the world by the end of the year to 35%.
This represents an increase of ten percentage points from its estimate in July. Bruce Kasman, the chief global economist at the investment bank, stated that there were “hints at a sharper-than-expected weakening in labor demand and early signs of labor shedding.”
Additionally, business surveys indicate that there is “a loss of momentum in global manufacturing.”The substantial and ongoing advances in overall activity headed by the service sector are helping to moderate these factors, he noted.
Conversely, we are tempering these forces.The probability that a recession will occur by the end of 2025 has stayed similar at 45%, according to JPMorgan. Kasman added that the company acknowledged “additional uncertainties related to the political backdrop.”
