Goldman Sachs Lowers US Recession Risk To 15% After Robust Jobs Data

Goldman Sachs has reduced the likelihood of a U.S. recession in the coming year to 15%. This revision follows a strong employment report for September.

What Happened: The Labor Department’s figures showed that U.S. job growth reached its highest level in six months, with unemployment dropping to 4.1%. This shift has changed the labor market narrative, according to Goldman Sachs chief U.S. economist Jan Hatzius, Reuters reported on Monday.

Goldman Sachs maintains its forecast for sequential 25 basis point rate cuts, targeting a terminal rate between 3.25% and 3.5% by mid-2025. Hatzius mentioned a decreased probability of a 50-basis-point cut, following the Federal Reserve’s recent 50-basis-point rate reduction.

See Also: Why US Stock Futures Are Narrowly Mixed Ahead Of Jobs Data

Financial markets have increased the likelihood of a quarter-percentage-point rate cut in November to 95.2%, according to CME Group’s FedWatch tool. Despite fluctuations in job numbers, Goldman Sachs sees no major reason for weak job growth amid high job openings and strong GDP growth.

However, the brokerage cautioned that October could present challenges due to potential impacts from a hurricane and a significant strike.

Why It Matters: The latest jobs report, which saw the U.S. economy adding 254,000 nonfarm payroll jobs in September, exceeded economist forecasts and signaled a resilient labor market. This improvement over August’s revised figure of 159,000 jobs has bolstered optimism about the economy’s strength. The report also highlighted a decline in unemployment and an increase in wages, reinforcing the positive outlook.

Additionally, the private sector’s job gains in September, as reported by the ADP National Employment Report, surpassed expectations with 143,000 jobs added, indicating a rebound in job creation after a five-month slowdown. This data underscores the labor market’s resilience, despite slower pay growth for job-stayers and job-changers.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari