Goldman Sachs downgraded its recession probability for the United States to 25% on Tuesday, according to a Wall Street Journal report.
A 25% probability is a decrease from Goldman’s 35% expectation set in March and a far cry from the expectation of 65%. The new Goldman expectation also deviates from New York Federal Reserve predictions from April of 2023 that set the probability to as high as 58%, Business Insider reported. Goldman Sachs justified their predictions based on the expectation that the Federal Reserve would only raise interest rates by 25 basis points in July, Reuters reported.
A May jobs report from the U.S. Bureau of Labor Statistics expressed strong gains, with non-farm payroll employment increasing by 339,000 despite a 0.3% increase in the unemployment rate to 3.7%. Even with a strong labor market, fears of recession still remain as inflation persists above the Federal Reserve’s 2% target.
However, chief economist for Moody’s Analytics Mark Zandi told CNN last Friday that “[f]or this year, given these jobs numbers, it’s hard to see a recession. Increasingly, the odds of a recession this year are fading.” Zandi, however, held that there is a one in three chance that recession strikes in the medium term with a recession in 2024 rising to 50/50 odds.
“We are not in a recession. People have been telling us we’re in a recession for the last two years. They’ve been wrong each and every day. .. it would be absurd to use r-word at a time when we’re creating jobs at this rate.”@JustinWolfers @CNN https://t.co/j5lLlkoyjL
— Carl Quintanilla (@carlquintanilla) June 5, 2023
Declining fears of recession compared to the New York Federal Reserve’s prediction are not isolated to Goldman and Zandi. Morgan Stanley also does not see an incoming recession in 2023, predicting that the Federal Reserve will hold rates steady into 2024. JPMorgan Asset Management Chief Global Strategist David Kelly said that “the odds of a soft landing are going up” after the jobs report came out. (RELATED: ‘The Stakes Could Not Have Been Higher’: Biden Celebrates Bipartisan Passage Of Debt Ceiling Raise)
Chair of the Federal Reserve Jerome Powell and the Federal Reserve governors have yet to announce their position on rate hikes with the next of the remaining five meetings this year taking place from June 13 to 14.