Goldman: Recession Seems Less Likely After Jobs/Sales Reports

Economists at Goldman Sachs have lowered the likelihood of a U.S. recession.

As Bloomberg News reported Saturday (Aug. 17), the banking giant now gives an economic downturn a 20% chance of happening, down from 25%, based on recent retail sales and unemployment claims data.

And assuming the next jobs report — set to be released Sept. 6 — “looks reasonably good, we would probably cut our recession probability back to 15%, where it stood for almost a year” before a revision on Aug. 2, the Goldman economists wrote.

The Bloomberg report noted that a host of data showing American economic strength led stocks to their best week of 2024. The value of retail sales rose in July by the most since early 2023, while unemployment data showed the fewest applications for jobless benefits last week since early July.

Goldman’s economists also argued they have become “more confident” the Federal Reserve will reduce interest rates by 25 basis points at their September meeting, “although another downside jobs surprise on September 6 could still trigger a 50 bp move.”

Writing about the retail sales data last week, PYMNTS wrote that it’s still not clear if the July rebound carries enough momentum to allow retailers to relax heading into the crucial fourth quarter and holiday shopping season.

“We noted that inflation has broken below 3%, and as announced yesterday, inflation was at 0.2%, up from the 0.1% decline that had been seen in June,” that report said.

“Connecting the dots here — inflation was up, but outpaced by unadjusted sales figures in July — means that, of course, consumers bought more of most of the items they use for everyday life, with the exception of what we might think of as summer wardrobes and summer-related leisure equipment.”

It must also be pointed out that the product categories that are less discretionary or cheaper have increased in terms of overall retail sales — food and beverage are standouts here, while general merchandise stores such as Walmart, which reported strong results last week, said comp sales were up more than 4% in the most recent quarter.

Research by PYMNTS Intelligence has found that year over year, as measured against 2023, both seasonally adjusted and unadjusted sales have been on the increase, and that perhaps July’s momentum will boost retailers beyond the end of the summer.