Goldman Sachs lowers probability of U.S. recession to 20% based on latest data | Real Time Headlines

Goldman Sachs As new labor market data triggered a reassessment of the market’s view of the economy, the Federal Reserve lowered its forecast for a U.S. recession to 20% shortly after raising it.

Goldman Sachs economists earlier this month raised their 12-month probability of a U.S. recession to 25% from 15%. July employment report Data on August 2 showed that non-agricultural employment increased by 114,000, lower than expected. That was down from June’s downwardly revised 179,000 and below the Dow Jones estimate of 185,000.

The report raised widespread concerns about the world’s largest economy and sparked a sharp but ultimately short-lived incident. stock market selloff At the beginning of the month.

also triggered “Sam’s Rules” A historical indicator that shows the initial stages of a recession begin when the three-month moving average of the U.S. unemployment rate is at least half a percentage point above its 12-month low.

Goldman Sachs initially cited this as a reason to raise the probability of a recession, but changed tack on Saturday, writing in a note that it believed the probability dropped to 20% as data released since August 2 showed “no signs of recession.”

These include July retail sales — Growth of 1% vs. 0.3% expected — and Weekly filing for unemployment benefitslower than expected.

The numbers triggered a change in sentiment, which was reflected in the stock market’s rebound Global stocks riseAte here last week.

“Continued expansion will make the U.S. look more like other G10 economies, where the Sam Rule applies to less than 70 percent of them,” Goldman Sachs economists said on Saturday, noting that several countries, including Canada, Smaller economies have seen sharp increases in unemployment without entering recession in the current cycle.

Claudia Sahm, chief economist at New Age Consultants and the inventor of the rule told CNBC She does not believe the U.S. is currently in recession, but further weakness in the labor market could push it into one.

The bank’s economists said the healthy jobs report on September 6 “could” prompt Goldman Sachs to lower the probability of a recession to 15%, where it had been for nearly a year before August.

They added that unless the jobs report unexpectedly drops again, Goldman Sachs will be more confident in forecasting a 25 basis point rate cut at the Federal Reserve’s September meeting rather than a sharp 50 basis point cut.

According to CME’s FedWatch tool, the market has fully priced in the impact of the Federal Reserve’s interest rate cut in September, but the possibility of a 50 basis point rate cut has been significantly reduced to 28.5%.

Rashmi Garg, senior portfolio manager at Al Dhabi Capital, told CNBC: “Capital dockingOn Monday, she predicted a 25 basis point rate cut “unless we see a significant deterioration in the labor market in the September 6 jobs report.”

—CNBC’s Sam Meredith contributed to this article.