Goldman Sachs announced this week that it is increasingly optimistic about the United States’ prospects of avoiding a recession. In a research report out this week, the investment bank estimated the odds of a recession occurring in the next year at 15%, which is roughly the historical average chance of a recession on any given year. Godman Sach’s optimism is based on encouraging economic news regarding inflation and jobs as well as the Fed’s handling of interest rates.
“We strongly disagree with the notion that a growing drag from the ‘long and variable lags’ of monetary policy will push the economy toward recession,” Jan Hatzius, Goldman’s chief US economist, wrote in the report. “In fact, we think the drag from monetary policy tightening will continue to diminish before vanishing entirely by early 2024.”
The report indicates that Goldman Sachs believes the Fed has finished raising interest rates for the foreseeable future. It also predicts that wages will grow faster than prices, giving consumers the ability to keep spending. “The August jobs report couldn’t be much better,” Moody’s Analytics chief economist Mark Zandi wrote Friday on X, formerly known as Twitter. “The report has soft landing written all over it.”
