Goldman Sachs "turns around", affirms that the US economy shows no signs of recession

In a newly released report, Goldman Sachs lowered the likelihood of an imminent US recession , stating that the probability is now only 20%.

Sustained growth would bring the US economy closer to other G10 economies – where the Sahm Rule is only about 70% accurate. (Source: Medium)

On August 2nd, the US Department of Labor released a report showing that the number of new non- agricultural jobs in the US economy reached only 114,000 last month, significantly lower than the adjusted figure of 179,000 new jobs in June and the forecast of 185,000 new jobs given by economists in a Dow Jones survey.

The July jobs report fueled concerns about the health of the US economy, leading to a sharp but swift sell-off in the stock market.

Investors at the time believed that the US Federal Reserve (Fed) had kept interest rates too high for too long, putting the economy at risk of a "hard landing"—preventing inflation but resulting in an economic recession.

Earlier, the July unemployment rate rose to 4.3% from 4.1%, also triggering the “Sahm Rule”—an indicator of an economy on the verge of recession when the three-month moving average of the US unemployment rate is at least half a percentage point higher than its lowest point in the previous 12 months.

Following the release of the report, Goldman Sachs raised its probability of the US economy falling into recession from 15% to 25%.

However, over the weekend, the bank once again changed its stance, reducing this possibility to 20%, based on the assessment that economic data released since August 2nd "shows no signs of recession".

These included the July retail sales report showing a 1% increase, compared to a forecast of 0.3%; and the weekly initial jobless claims report showing fewer people applying for unemployment benefits than expected.

These figures helped improve sentiment in financial markets, driving stock prices on Wall Street and many other markets higher last week.

A Goldman Sachs report stated: "Sustained growth will bring the US economy closer to other G10 economies – where the Sahm Rule is only about 70% accurate."

According to this report, smaller developed economies than the US – such as Canada – have seen a sharp increase in unemployment during this economic cycle, but have not yet fallen into recession.

Claudia Sahm, chief economist at New Century Advisors and author of the Sahm Rule, doesn't believe the U.S. economy is currently in recession. However, she asserts: "A continuing downturn in the job market could push the economy into recession."

Source: https://baoquocte.vn/goldman-sachs-quay-xe-khang-dinh-kinh-te-my-khong-thay-dau-hieu-suy-thoai-283268.html