According to the retail sales data and initial claims for unemployment benefits in the past week, economists at Goldman Sachs Group Inc. have lowered the possibility of a U.S. economic recession next year from 25% to 20%.
Official U.S. data shows that despite a recent decrease in hiring, the number of initial claims for unemployment benefits has decreased for the second consecutive week, reaching the lowest level since early July.
According to data released by the Department of Labor on August 15, in the week ending August 10, the number of initial claims for unemployment benefits decreased by 7,000 to 227,000, below the Bloomberg survey’s median economist forecast of 235,000.
Another report released by the U.S. Department of Commerce on August 15 showed a 1% month-over-month increase in retail sales in July, marking the highest level since early 2023. Car sales were one of the main driving factors. After a cyber-attack on car dealers earlier this year led to a decline in car sales in June, there was a significant rebound in July, driving overall sales growth. Consumer electronics and appliances also saw growth. This indicates that despite rising borrowing costs, consumers are still maintaining their spending habits. Following the report’s release, U.S. bond yields and stock indexes surged.
According to Bloomberg, economists at Goldman Sachs led by Jan Hatzius hinted in a report to clients on Saturday, August 17, that there is a possibility of further lowering the probability of a U.S. economic recession. The report stated that if the employment report for August scheduled to be announced on September 6 “looks decent,” Goldman Sachs may reduce the recession probability to 15%. 15% is the average risk of an economic recession occurring in any given year.
If the U.S. Department of Labor’s employment report on September 6 shows another downturn in the market, it could prompt the Federal Reserve to decide on a 50-basis-point rate cut at its policy meeting in September. However, economists at Goldman Sachs express “greater confidence” that the Federal Reserve will cut rates by 25 basis points.